This collapse was disastrous for the nation's economy. A startling 89 of the country's 364 railroads crashed into bankruptcy. A total of 18,000 businesses failed in a mere two years. By 1876, unemployment had risen to a frightening 14 percent.The following year, Congress passed the Specie Resumption Act of 1875, which would back United States currency with gold. Backing American currency with gold helped curb inflation and stabilize the dollar.
Global markets would also need some sort of economic direction from the U.S. The Fed manages the dollar — and as the world's leading currency, a void left by a Fed-less America could throw those markets into chaos with uncertainty about who's managing U.S. interest rates and the American economy.
The financial panic of 1873 and the subsequent economic depression helped bring Reconstruction to a formal end. Across the country, but especially in the South business failures, unemployment, and tightening credit heightened class and racial tensions and generated demands for government retrenchment.
The Panic of 1873 triggered the first 'Great Depression' in the United States and abroad. Lasting from September 1873 until 1878/9, the economic downturn then became known as the Long Depression after the stock market crash of 1929.The panic started with a problem in Europe, when the stock market crashed. Investors began to sell off the investments they had in American projects, particularly railroads. Back in those days, railroads were a new invention, and companies had been borrowing money to get the cash they needed to build new lines.
Speculative lending practices in the West, a sharp decline in cotton prices, a collapsing land bubble, international specie flows, and restrictive lending policies in Britain were all factors.
Grant, Ulysses S.
(1822-1885): America's eighteenth president (1869-1877), Grant received public blame for the panic of 1873. Johnson, Andrew (1808-1875): The seventeenth president (1865-1869), Johnson met with the National Labor Union to discuss eight-hour day legislation.Railroad construction halted nationwide as credit dried up, thousands lost their jobs, others saw their wages drop. While the panic passed after a year, the Panic of 1873 began a period of extended slow growth in the United State that lasted almost 10 years.