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Panic of 1837

Definition

The Panic of 1837 was a financial crisis in the United States that led to an economic depression. It was triggered by a speculative fever, bank failures, and a lack of confidence in the paper currency.

Analogy

Think of the Panic of 1837 like a game of Jenga. The economy was stacked high with speculation and risky banking practices (the wooden blocks). When one piece (confidence in paper currency) was pulled out, the whole structure came crashing down.

Related terms

Speculation: This is when investors buy assets with the hope that their prices will rise so they can sell them for profit later. It's like betting on your favorite sports team because you think they'll win big.

Bank Failures: This happens when banks cannot meet their obligations to depositors or other creditors because they have become insolvent. Imagine if your local grocery store suddenly closed down without warning - it's similar to that but on a much larger scale.

Economic Depression: A long-term downturn in economic activity characterized by high unemployment rates and low levels of trade and investment. Picture this as winter season where everything slows down, trees lose leaves (unemployment), less people go out (low trade), and animals hibernate (low investment).