The Panic of 1873

A year ago this week, Occupy Wall Street began as a relatively small protest in a park in New York City’s Wall St. Area. It is now an international movement that stands against financial greed and the “corrosive power” of major banks they feel led to our recent economic collapse.

A place not unaccustomed to financial panic and discord, Wall Street was also one of the earliest areas hit in the beginning of the original Great Depression in 1873. That year, the New York Stock Exchange was forced to close its doors for the very first time on September 20 during what was known as the Panic of 1873.

Much like our most recent economic disaster, the Panic of 1873 was sparked by the collapse of a large financial institution: Jay Cooke & Company, a brokerage firm and a major investor in railroad construction. Their failure led to a chain reaction and the country suffered economic despair for years, resulting in history’s worst financial crisis until the second Great Depression came along in the 1930’s.

The Big Mac Index

When the September 1986 The Economist hit newsstands, it contained a new form of measuring purchasing power parity, which is a way of calculating the effectiveness of currency exchange rates.

The standard they used to measure this purchasing power parity? A McDonalds Big Mac. That’s right. Thanks to a woman named Pam Woodall and her semi-humorous take on world economics, financial minds across the world have referred to the Big Mac Index as a reasonable real-world measure of inflation and exchange rates.

So much so, in fact, that after being pointed out for a huge gap between its burger inflation and the country’s official rate, McDonalds chains all over Argentina were asked to sell Big Macs at a lower price to manipulate the country’s performance on the index.

The Economist now varies their items from time to time, using a Starbucks tall latte, for example, but the phrase “burgernomics” is still going strong!