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Why the US will survive this recession

The inventions of the 19th century show how economic challenges foster ingenuity

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Over the course of two months, New York State alone lost more than $100 million. Of 850 banks in America, 343 closed. The unemployment rate for blue-collar jobs skyrocketed to 30 percent.

Most agree that this incredible collapse was due in large part to banks and a system that encouraged wild speculation and extended credit beyond what could be supported.

Sound familiar?

This is not a description of what happened last year. Rather, it occurred during the abject and catastrophic "Panic of 1837." (New York's losses then would be about $1.9 billion in today's dollars.)

While there is much to learn from the collapse itself, the recovery process through 1844 offers important lessons to America in 2009.

Consider this: The dramatic downturn laid the foundation for the second phase of the Industrial Revolution.

One of the most prominent inventions of the 1800s was the railroad. Only the transformative power of flight in the 20th century comes close to equaling the railroad's effect on American history.

That the railroad industry's expansion occurred simultaneously with economic collapse was not a singular event; rather, it was an indication of recovery coming through invention and daring. The railroad started as a single circle of track laid by John Stevens in 1825, burgeoned into 2,800 miles by 1840, and tripled to more than 9,000 between 1840 and 1850.

Indeed, the Panic of 1837, and the ensuing five years of economic contraction, aligns nearly perfectly with the shallow end of the bell curve for economic growth. And the railroad was a market catalyst.

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