A financial crisis is the culmination of a period of rising prices, and a sudden fall which shatters the credit of some banks, brokers, merchants, and manufacturers.  Every crisis is marked by much confusion and loss and by hasty efforts of individuals and institutions to meet their pressing obligations.  Sometimes this process of liquidation goes on quietly and in other cases it becomes a wild scramble, each one trying to save himself, in which case it is a financial panic.  An industrial depression is the period of hard times that usually follows a financial crisis.

Sec. 3. #A feature of a money economy.# Financial crises, by their very nature, are confined to communities in which the money economy prevails and where there is a developed state of industry.  The periods of industrial hardship in the Middle Ages were connected usually not with the collapse of prices, but with political oppression, famine, wars, pestilence, and scourges of nature.  Throughout the lands money was little used and there was no development of credit and of credit prices.  The money economy began, as has been noted, in the cities.  As the use of money spread, as larger commercial enterprises were undertaken, as borrowing and the payment of interest became common, there began to appear in city trading circles, on a small scale, the phenomena of the modern crisis.[2]

Sec. 4. #European crises.# In Europe financial crises date from 1763 and have occurred at more or less regular intervals since.  The common statement that the cycle of a crisis is run in a period of ten years, finds only partial support in history.  The chief crises of the eighteenth century occurred in 1763, 1783, 1793, these dates marking the close of wars of some magnitude.  The crises were not widespread or general, but were more marked in England, which was at that time farther developed industrially and in its money economy than other countries.  Likewise, in the nineteenth century, the crises were of unequal force in various countries, usually being severer in England.  They may be dated 1803, 1825, 1838, 1847, 1857, 1864-66, 1875, 1890, 1900, 1907, and 1914.  These were attributed to various causes; that of 1825 to over-trading abroad; that of 1847 to railroad-building; while that of 1866 followed the severe disturbance of trade in 1864 caused by the interruption of the cotton trade and commerce by the Civil War in America.  While in many parts of England the crisis of 1864 was unusually severe, in other countries it was of little moment.  Germany, after several years of great speculative prosperity, had a most severe crisis in 1875; while France, although prostrated by the war of 1870-71, losing a large amount of wealth, and paying a thousand millions of dollars to Germany as a war indemnity, escaped a commercial crisis almost entirely at that time.