ABSTRACT
All the great panics have come, not as business cycles, but as a result of a drop to a new and lower price level. Three major panics have occurred after a period of active building construction. In each of these cases, the public and private indebtedness had become adjusted to the price level and was somewhat high even at the price level. These were the panics of 1837, 1873, and 1929. A panic in which indebtedness on real estate is high must be a long panic if the commodity price level drops sufficiently to disturb mortgages. Major declines in prices in the United States occurred in 1864, and 1920. In each case, the decline came after a period of reduced building, so that there was a general shortage of permanent equipment. Prices of 30 basic commodities indicate the severity of the three panics. The prices of these basic commodities in gold reached 59 per cent of pre-war in February, 1934.
