[PeaRidge]

You brought up the Panic of 1857 and the Recession in the North

The panic of 1857 was caused by shifts in the world market as a result of the conclusion of the Crimean war and by corruption-induced business troubles at home in America.

Specifically, as the war concluded, the wheat demands it had created bottomed out. With the end of the war, the Russians were able to send their grain crops to market. Needing to raise quick cash, they under priced their crops, and depressed American grain product prices. Demand for US grain dropped, and soon Northern exports dwindled.

With overproduction in the mid-west, the wheat market collapsed, causing an economic depression in the West.

At the exact same time the continental European banks were being adversely affected by the war’s conclusion. The British were withdrawing specie from US banks, further compounding the problems.

Simultaneously, several major railroad embezzlement scandals were exposed, shaking up their creditors on Wall Street, all of them already uneasy due to the wheat problem and shaky banking state in France.

The banks then panicked and a recession set in.

Northern politicians at the time fraudulently used the panic as an excuse to promote their tariff policies that would be detrimental to the recovery.

8/24/1857 The New York Branch of the Ohio Life and Insurance Company failed. This was important because it was the largest bank in Ohio, and purveyor of Eastern credit and hard currency to the West. It failure jarred the national banking system.

As a result, 4,932 U. S. firms eventually failed.

The next month, one of the largest banks in Philadelphia, alarmed by the drains on its coin reserves, suspended specie payments. Most Northern banks reacted by hoarding reserves, and tightening credit. Soon, many banks in the North began to close.

9/11/1857 Northern banks relied heavily on newly mined gold sources from California.
On this date the Steamship SS Central America sailed directly into the path of a severe hurricane. The ship carried $1,000,000 in commercial gold and a secret cargo of 15 tons of California gold valued at $20 per ounce ($9,600,000). New York banks were waiting for the gold to meet depositor withdrawal demands.

9/12/1857 The SS Central America sank with the loss of 400 passengers. The loss of the ship and its important cargo, devastated the banking and financial system of the country.

Fall/1857 Tens of thousands of Americans were thrown out of work. Over 800 banks collapsed. The sale of public lands nearly stopped altogether. Numerous wealthy manufacturers and investors went bankrupt. The panic turned into national depression that lasted for several years.

The banking failures were due to several reasons, primarily insolvency due to overextended credit to land speculators and railroad construction.

Cotton and tobacco production was not affected by the economic downturn. The South survived the 1857 panic, in large part, because of Europe’s continued demand for cotton.

Due to the fact that Southern cotton and tobacco producers took European manufactured goods in trade and were thus not dependent upon specie for payment, they were further removed from the financial crisis. Production increased, and the South prospered.

In the North, there was a flood of people to the industrial cities because of the failure of the farms as a employment option. Many believed that the great jobs and money were to be made in the factories.

Industrialization was having an impact on the northern and western farms - no longer were large crews needed.

By 1858 the McCormick Harvesting Machine Company was the largest farm equipment manufacturer in the United States, with assets totaling over one million dollars.

The family farm was beginning to disappear because of the economics of the time. Railroads were charging more for transporting their grain and a farm had to be large and mechanized to survive.

Vagrancy laws were enacted to keep the newly relocated workers, not on the farm but in the factories. Laws were enacted that forbid people to leave a town if they owed any debt.

With rising personal debt, these former farm hands either worked or went to prison. The father worked, the mother worked and the kids worked. Most often it still was not enough wage earning to survive without debt to the Company Store. (Some content from Kettell and Pollard)

[BroJoeK]

PeaRidge: "...several major railroad embezzlement scandals were exposed, shaking up their creditors..."

That's impossible since, according to our DiogenesLamp it was Civil War Republicans who first brought corruption to America.
Before that everybody was as pure as the driven snow, says DiogenesLamp.

PeaRidge: "With overproduction in the mid-west, the wheat market collapsed, causing an economic depression in the West."

From peak (1855) to trough (1858), grain prices did fall 60% causing some serious problems.
However, overall result of the Panic of 1857 was a 23% reduction in business activities.
That is hardly a "collapse".

For comparisons: the recession of 1854 reduced the economy 18%, the Panic of 1857 23% and the recession of 1861 15%.
Of the three, 1857 was slightly more severe, but none were relatively long-lived or deep.

PeaRidge: "Northern politicians at the time fraudulently used the panic as an excuse to promote their tariff policies that would be detrimental to the recovery."

The much reduced Tariff of 1857 was set before the Panic and indeed was (wrongly) blamed for the panic.
That 1857 tariff was described as:

"...possible because it did not represent a victory of one section over the other; nor did it produce a clear division between parties.
Its supporters included Democrats, Republicans, and Americans; representatives of northern merchants, manufacturers, and railroad interests; and spokesmen for southern farmers and planters.
Opposition came largely from two economic groups: the iron manufacturers of Pennsylvania and the wool growers of New England and the West"

However, after the Panic protectionism became more popular than ever, finding expression in the Morrill Tariff adopted in 1861, only after its strongest opponents departed Congress.

PeaRidge: "As a result, 4,932 U. S. firms eventually failed."

You don't say what kind of firms those were, but here's what we know about them:

1. By 1857 about 8 million Americans were non-farmers.
   
2. Of those, about 1.5 million worked in 140,000 factories, an average of 10 workers per factory.
   
3. Even if we assume (wrongly) that all 4,932 business failures in 1857 were "factories", that's still only 3.5% causing unemployment among about 50,000 workers.
   Hardly a "great depression".
   
4. However, a large percentage of these factory workers were women & children, so their unemployment would not necessarily cause family crises.

PeaRidge: "...SS Central America sailed directly into the path of a severe hurricane.
The ship carried $1,000,000 in commercial gold and a secret cargo of 15 tons of California gold valued at $20 per ounce ($9,600,000).
New York banks were waiting for the gold to meet depositor withdrawal demands."

Not quite.
According to this source, SS Central America carried 10 tons of gold valued as $2 million at the time.
The loss did contribute to the Panic of 1857, however it was partly covered by insurance.

Btw, the wreck was found in 1988 and has not been fully recovered.
The gold is estimated at over $100 million in today's values.

PeaRidge: "Due to the fact that Southern cotton and tobacco producers took European manufactured goods in trade and were thus not dependent upon specie for payment, they were further removed from the financial crisis.
Production increased, and the South prospered."

Thank you for confirming elements of my argument:

1. First, the Deep South prospered greatly during the 1850s.
   
2. Cotton & tobacco producers did indeed deal directly with their European customers and were not forced to go through Northeastern businessmen.
   
3. Those same producers also took European goods in trade, presumably paying tariffs at the same ports they shipped from.

PeaRidge: "In the North, there was a flood of people to the industrial cities because of the failure of the farms as a employment option.
Many believed that the great jobs and money were to be made in the factories."

Statistics for the period show US farmers still outnumbered non-farmers nearly two to one.
In total the US had about 2 million farms, average size of 200 acres on which 15 million people lived.
Yes, the importance of non-farm employment was growing, but still nothing like today.

PeaRidge: "The father worked, the mother worked and the kids worked.
Most often it still was not enough wage earning to survive without debt to the Company Store."

What seems unnatural to us today (children working in factories) was then considered less unnatural since farm children also worked to help their family farms.
Indeed, many non-farm families worked just long enough to save up money to buy their own farms.
So "working class" was not necessarily a permanent status.

SS Central America: