boom-and-bust cycle

Examples of boom-and-bust cycle in the following topics:

• The Limits of Prosperity

  • At the same time, the rapid expansion of the American economy made it prone to boom-and-bust cycles; it also led to dangerous working conditions and increased tensions between the North and South.  
  • The Market Revolution primarily benefited wealthy planters in the South, industrialists in the North, and bankers and businessmen.
  • The North and South were divided in terms of their economies, social structures, customs, and political values.
  • Earlier economic downturns had arisen from international conflicts such as the Embargo Act and the War of 1812, and these downturns had resulted in widespread domestic foreclosures, bank failures, unemployment, and slumps in agriculture and manufacturing.
  • Prior to the Panic of 1819, American bankers, who had little experience with corporate charters, promissory notes, bills of exchange, or stocks and bonds, encouraged a land speculation boom during the first years of the Market Revolution and engaged in irresponsible lending.

• Conclusion: An Industrializing Economy

  • These industrial and market revolutions, combined with advances in transportation, transformed the economic and social landscape.
  • It was now a market economy and the production of goods, and their prices, were unregulated by the government.
  • As American economic life shifted rapidly and modes of production changed, new class divisions emerged and solidified, resulting in previously unknown economic and social inequalities.
  • At the same time, workers were subjected to harsh and dangerous working conditions and required to work long hours for very little pay and no job security.
  • The expansion of the American economy also made it prone to the boom-and-bust cycle, in which runaway land speculation led to economic downturns during which wage workers lost their employment and investors lost their assets.

• Economic Booms and Busts

  • The Market Revolution produced an upsurge in speculative investments, which resulted in periods of economic boom and bust.
  • These speculative investments were frequently made with borrowed funds, resulting in large-scale cycles of boom and bust in the early 1800s.
  • Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention of the cotton gin in 1793.
  • Millions also migrated to fertile farmlands of the Midwest and new roads and waterways opened up new markets for western farm products.
  • The panic resulted in a wave of bankruptcies and bank failures; land prices dropped and wide-scale urban unemployment began .

• The Panic of 1837

  • These speculative investments were frequently made with borrowed funds, resulting in large-scale cycles of boom and bust in the early 1800s.
  • Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention of the cotton gin in 1793.
  • Millions also migrated to fertile farmlands of the Midwest, and new roads and waterways opened up new markets for western farm products.
  • In 1837, Vermont's business and credit systems took a hard blow.
  • Ohio, Indiana, and Illinois were agricultural states, and the good crops of 1837 were a relief to farmers.

• Wall Street Crash of 1929

  • The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market.
  • Congress passed the Glass–Steagall Act, mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.
  • Many academics see the Wall Street Crash of 1929 as part of a historical process that was a part of the new theories of boom and bust.
  • According to economists such as Joseph Schumpeter and Nikolai Kondratieff, the crash was merely a historical event in the continuing process known as economic cycles.
  • The impact of the crash was merely to increase the speed at which the cycle proceeded to its next level.

• The Great Depression

  • A speculative boom had taken hold in the late 1920s, which led hundreds of thousands of Americans to invest heavily in the stock market.
  • Many academics see the Wall Street Crash of 1929 as part of a historical process called boom and bust.
  • According to economists such as Joseph Schumpeter and Nikolai Kondratieff, the crash was merely a historical event in the continuing process of economic cycles.
  • The impact of the crash was merely to increase the speed at which the cycle proceeded to its next level.
  • Milton Friedman's book, A Monetary History of the United States, co-written with Anna Schwartz, makes the argument that what made the "great contraction" so severe was not the downturn in the business cycle, trade protectionism, or the 1929 stock market crash, but the collapse of the banking system during three waves of panic over the 1930-33 period.

• The Market Revolution

  • The Market Revolution (1793–1909) in the United States was a drastic change in the manual-labor system originating in the South (and soon moving to the North) and later spreading to the entire world.
  • The dramatic changes in labor and production at this time included a great increase in wage labor.
  • The agricultural explosion in the South and West and the textile boom in the North strengthened the economy in complementary ways.
  • Federal and local governments, as well as private individuals, invested in roads, canals, and railroads.
  • This period of rapid development in the East and expansion in the West produced a wave of land speculation that resulted in economic periods of boom and bust.