Financial panic
A financial panic is a sudden, drastic, widespread economic collapse. All at once, many people become convinced their money or investments are at risk and rush to the institutions holding their assets. Unable to pay back all their customers at once, the institutions go bankrupt, starting a domino effect that brings down the whole economy. Typical "symptoms" of panic are many bankruptcies, loan defaults, or bank failures at the same time; It also includes a period of intense stock market or real estate speculation followed by a steep decline in prices; and a sudden run on banks by large numbers of people trying to withdraw their deposits [Encyclopedia]. Until the 19th century, economic fluctuations were connected mainly with shortages of goods, market expansion, and speculation, as in the South Sea Bubble (1720) incident, when stock speculation reached panic proportions in France and England. Panics in the industrialized societies of the 19th and 20th centuries, however, have reflected the increasing complexity of advanced economies and the changed character of their instability. A financial panic has quite often been a prelude to a crisis that extended beyond commercial activities into sectors of consumption and capital-goods industries. For example, the Panic of 1857 in the United States was the outcome of several developments, including the railroads’ defaulting on their bonds, the resultant decline in the value of rail securities, and the tying up of bank assets in nonliquid railroad investments. Its effects were also complex, including the closing of many banks, a sharp increase in unemployment in the United States, and a money-market panic on the European continent. The Panic of 1873, which began with financial crises in Vienna in June and New York City in September, marked the end of the long-term expansion in the world economy that had begun in the late 1840s. An even greater panic, however, was the stock market crash of 1929, which bankrupted many U.S. stock investors and presaged the Great Depression.[Britannica].