he
usual course. In the first crisis, banking houses broke down, unable to
meet the runs of their depositors or their original obligations. The
depositors next, unable to secure their own funds or to obtain their
usual loans, were driven to insolvency. After the failure of banks came
that of railroads, the wholesale houses, and the factories. As these
last defaulted, the loss was spread over their employees, their
contractors, and their creditors. Confidence was everywhere destroyed.
Investments were lost, or lessened, or put off indefinitely in their
payments. After a few days the acute crisis was over, but the resulting
depression brought stagnation to business. Industries marked time, at
best; expansions were out of the question; new enterprises were not
heard of. From 1873 until 1879 the United States was engaged in recovery
from the injury which the panic had done and from the weakness which it
had revealed.

The panic, followed by five years of economic prostration, was only
occasioned by the failure of Cooke. Its real causes lie throughout the
period of Civil War expansion. Never had the daily necessities of the
United States equaled its production, and the resulting surplus,
available for permanent improvements, was larger than ever in the
sixties because of the growing use of machinery. Funds for investment,
produced at home and increased through the strong foreign credit of the
United States, tempted and aided the speculative development of the
North and West. Yearly greater sums were sunk in municipal improvements
that brought in no return, or in railroads that were slow in paying, or
in errors that were a dead loss. The loss from the Civil War was an
added charge upon the surplus. Great fires in Boston and Chicago
consumed more of it. By 1870 the United States was using surplus at a
rate that threatened soon to exhaust it. When the limit should be
reached, new enterprises must necessarily cease, and all that were not
wisely planned must fall, dragging down others in their ruins. For
months before the failure of Jay Cooke, business had been dangerously
near this margin. His failure, caused by his inability to find a market
for Northern Pacific, merely precipitated the inevitable crash.

The faulty currency, outstanding since the war, and adding to the
business uncertainty, now aggravated the panic when it broke. The
greenbacks were slowly rising in value. They profited by the growing
credit of the United St