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.
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.
In the shadow of this – the absolute worst economic recession in the history of the US at the time – American ingenuity reached a peak.
Between 1837 and 1844: Samuel Colt invented the revolver, changing firearms forever; John Deere revolutionized farm implements with a new version of the plow; the use of ether anesthesia for surgery was pioneered; the printing industry was transformed with the invention of the rotary printing press; and Charles Goodyear permanently altered manufacturing with the development of vulcanized rubber – just to list a few of the most notable examples.
Then, as in 2008, America's most prominent financial institutions collapsed or nearly failed under the weight of speculative promises. Yes, the devastation is remarkably similar, but so is the cure.
From the Panic of 1837 to the Great Depression of the 1930s to the difficulties of 1969 and '70 when the cost of living jumped 15 percent, American ingenuity has consistently beat back economic calamity.
In 1837, it was the individuals who cast their vision forward who succeeded. Tough times spur recovery.
The time is ripe for American genius to surge. We must shed the idea that our government can buy us out of a depression or somehow use a new tariff or tax to encourage growth.
Rather, we must turn to our ingenuity and the audacious independence unique to our nation – and change the course of America.
Nathan Fisk is a political and business consultant residing in Colorado.