The change is generally quicker because some check to credit happens at an early stage of it.  The mercantile community will have been unusually fortunate if during the period of rising prices it has not made great mistakes.  Such a period naturally excites the sanguine and the ardent; they fancy that the prosperity they see will last always, that it is only the beginning of a greater prosperity.  They altogether over-estimate the demand for the article they deal in, or the work they do.  They all in their degreeand the ablest and the cleverest the mostwork much more than they should, and trade far above their means.  Every great crisis reveals the excessive speculations of many houses which no one before suspected, and which commonly indeed had not begun or had not carried very far those speculations, till they were tempted by the daily rise of price and the surrounding fever.

The case is worse, because at most periods of great commercial excitement there is some mixture of the older and simpler kind of investing mania.  Though the money of saving persons is in the hands of banks, and though, by offering interest, banks retain the command of much of it, yet they do not retain the command of the whole, or anything near the whole; all of it can be used, and much of it is used, by its owners.  They speculate with it in bubble companies and in worthless shares, just as they did in the time of the South Sea mania, when there were no banks, and as they would again in England supposing that banks ceased to exist.  The mania of 1825 and the mania of 1866 were striking examples of this; in their case to a great extent, as in most similar modern periods to a less extent, the delirium of ancient gambling co-operated with the milder madness of modern overtrading.  At the very beginning of adversity, the counters in the gambling mama, the shares in the companies created to feed the mania, are discovered to be worthless; down they all go, and with them much of credit.

The good times too of high price almost always engender much fraud.  All people are most credulous when they are most happy; and when much money has just been made, when some people are really making it, when most people think they are making it, there is a happy opportunity for ingenious mendacity.  Almost everything will be believed for a little while, and long before discovery the worst and most adroit deceivers are geographically or legally beyond the reach of punishment.  But the harm they have done diffuses harm, for it weakens credit still farther.

When we understand that Lombard Street is subject to severe alternations of opposite causes, we should cease to be surprised at its seeming cycles.  We should cease too to be surprised at the sudden panics.  During the period of reaction and adversity, just even at the last instant of prosperity, the whole structure is delicate.  The peculiar essence of our banking system is an unprecedented trust between man and man:  and when that trust is much weakened by hidden causes, a small accident may greatly hurt it, and a great accident for a moment may almost destroy it.