Panic of 1873

[Meredith Poor + 894]

From Wikipedia: The American Civil War (1861-1865) was followed by a boom in railroad construction. 33,000 miles (53,000 km) of new track were laid across the country between 1868 and 1873. Much of the craze in railroad investment was driven by government land grants and subsidies to the railroads. At that time, the railroad industry was the nation's largest employer outside of agriculture, and it involved large amounts of money and risk. A large infusion of cash from speculators caused abnormal growth in the industry as well as overbuilding of docks, factories and ancillary facilities. At the same time, too much capital was involved in projects offering no immediate or early returns.

Sound familiar?

Human nature never changes.

[Jan van Eck + 7,558]

The other problem with those post-Civil-War railroads was that they were not built to serious engineering standards as to loads.  The trestles and bridges were largely built of wood on wood, or all-wood structures, that could not carry loads with any overload safety factor.  The result was predictable: a certain number of those wooden bridges collapsed once a heavier steam engine attempted to cross - and engines were being built larger and larger to haul heavier trains up steeper grades and for longer distances.  

I think you see the same situatiion in US housebuildiwng with the pervasive use of planed 2x4 lumber and so-called "chipboard," a substitute cheap plywood made of shredded wood and glue, pressed out in sheets of the same dimensions as plywood. 

Plywood itself was a cost-saver substitute for solid wood, typically "tongue and groove," plankings laid at 45 degrees across the joists and rafters to provide the superior strength of triangulation.  The carpenters would pound the tongue into the groove of the adjacent plank, then nail the planks down into the joists, and you have one tough floor that would last for literally hundreds of years.  If you went whole-hog and used wood screws insted of nails, then your house was both hurricane=proof and tornado-proof.  Is there any momentum for doing that today?  Probably not, except on the high-end properties.  

Railroads opened the US Midwest to farm settlement and crops reaching ports on the East and Gulf coasts.  In that sense, they were an infrastructure investment akin to the Interstate Highways of the Eisenhower era.  Housing is also a social investment, one that is subsidized as private individual homeownership is seen as a societal benefit.  Do infusions of speculator cash drive up housing prices  (and encourage chipboard building)?  Sure they do.  Whether that is a good thing or a bad thing depends on where you sit.