Panic of 1857

The Panic of 1857 was a financial panic in the United States caused by the declining international economy and over-expansion of the domestic economy. Indeed, because of the interconnectedness of the world economy by the time of the 1850s, the financial crisis which began in the autumn of 1857 was the world's first world-wide economic crisis. In Britain, the Palmerston government circumvented the requirements of the Peel Banking Act of 1844 which required gold and silver reserves to back up the amount of money in circulation. This circumvention set off the Panic in Britain. Beginning in September 1857, the financial downturn did not last long; however, a proper recovery was not seen until the American Civil War. After the failure of Ohio Life Insurance and Trust Company, the financial panic quickly spread as business began to fail, the railroad industry experienced financial declines and hundreds of workers were laid off. Since the years immediately preceding the Panic of 1857 were prosperous, many banks, merchants, and farmers had seized the opportunity to take risks with their investments and as soon as market prices began to fall, they quickly began to experience the effects of financial panic.