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. Currency in the nineteenth century was based on specie. Metal money circulated, and banks issued paper banknotes backed by the supply of gold and silver. In the United States, this system began breaking down in the face of financing the Civil War. President Lincoln authorized the printing of paper money, called "Greenbacks," to pay ballooning expenses. Widespread use of fiat External money continued into the Reconstruction Era, fueling the rapid expansion of railroads and wild speculation.

Banks, especially Jay Cooke and Co. raised millions of dollars through selling bonds to finance construction. Speculators 'bet' on the railroad, gambling on the fact that settlement and opportunities to make money would follow behind the completed railway. However, construction expenses ballooned and outpaced financing. Efforts to raise more funding failed. When they could no longer pay the bills, Jay Cooke and Co. and other banking houses folded. The collapse of the railway financiers sparked high bank withdrawals, the failure of brokerage firms, and railway construction halted. By September 20th, the New York Stock Exchange suspended trading for the first time.