How did the panic of 1857 lead to the civil war?

Answer 1

The economic depression in the USA called the Panic of 1857 hit the country hard. High levels of speculation over the new western lands of the US and the railways that serviced the West were "over done" in the eastern financial centers. The idea was

that uninterrupted progress in the West and the flow of gold from California would forestall any problems. The price of railway company stocks were extemely overvalued. Oddly enough the financial crash was set off by an unusal event.

A ship carrying millions of dollars in gold bullion from the Golden State ( California ) to the east coast meant to back the paer currency sank. A single bank failed and formed a dominoe affect. Banks, to protect themselves and their depositors, began to call in loans. The lending had been over extended and the loans became what is known as non performing loans. The banks began failing as depositors sought to retrieve their funds and the funds were unavailable.

Foriegn investments, mostley by large British banks, dried up and these banks withdrew as much money as they could from New York banks before they failed.

Manufacturers had no lines of credit available. Inventories piled up and workers were laid off. Factories stopped producing and their was no buyers for the massive inventories. As the Winter approached, there were actually children dying from starvation and the lack of medical attention in the slums of Irish slums of New York City.

The seeds of this intense depression were sown so long ago. It was so unexpected as well. Ironically the depression was the result of so much success and growth. New York was a vital center for the prosperity that like a wave flowed through Philadelphia and onward to Chicago.

The growth of New York City was astonishing by any measure in the world. The growth of the nation's prosperity even leap frogged over the worst event in US history, namely the Civil War. Between 1800 and 1850 the rate of growth in New York was 750%.

Yes, for sure, people in large numbers had headed West. Every part of the nation's success eventually led to the large urban areas. Immigrants however tended to enter and remain in the large cities not the western plains. The rapid expansion of retail banking, manufacturing and commerce brought new occupations into the urban centers.

In the areas of law, insurance, real estate, education, hotels, department stores, restaurants, and news and book industries flourished as did buiness on the docks of the East coast cities.

The cities of course brought in foriegn workers and yes even the farm hands were drawn to the cities. The prosperity consealed underlying social problems however. The Panic of 1857 did not invent urban violence, it did however intensify as businesses floundered and unemployment rose.

Thus the depression came and lasted almost 2 years before the natural economic cycle revolved its course.

Answer 2

The Panic of 1857 lead to the Civil War by resurrecting economic issues. The two sides were already divided over issues of states rights, southern rights, and slavery.