Hogs, I was spelunking in a big library a couple of weeks ago and came across a magazine article published in 1909 titled "The Real Cause of Panics: Sound Evidence That Our Depressions Originate in Real Estate Booms." As the title infers, the author proposes that money which is drained from the economy by overpriced real estate and rent is money not spent on goods and services, leading to an economic downturn. This is a similar concept to what you described, but seems small-time in comparison.
The article has some interesting "text bites":
"Mr. Kohler claims that the coming of the recent panic [1907] was predicted by him long before it arrived and that the wonder of the age is that so few of our financiers display any knowledge as to the real cause of our panics."
He says that panics "come and go" and have a "periodicity that is almost determinable by their regular recurrence." [The length of the stock market's main cycle was very obvious, running 40, 45, and 50 months from 1896 through 1907, as measured using the Dow railroad average.]
"He [Mr. Kohler] claims that every panic we have had in this country was preceded by a real estate boom"
"Another element which has a disastrous effect . . . is the practice of purchasing during real estate booms vacant lots on the instalment plan" by "any man or woman with a regular weekly salary" because "the purchasing power of that person will be reduced by the amount of the instalments. [. . .] The effect of 10,000,000 consumers economizing in order to pay for these lots is directly felt by the store keeper, who complains of poor business and curtails his buying orders. [. . .] Mr. Kohler claims that 90 percent of the people who buy lots in this way lose all the money they have put into them, as well as the lots, through failure to complete the instalments. . ."
The magazine article is a sort of summary/review of a booklet titled "Hard Times: The Cause and the Cure: A Plea for Perpetual Prosperity" by James Pollock Kohler.
It is worth noting that a panic was generally regarded as a good time to buy stocks in that era. The trick, of course, was correctly identifying the panic bottom.
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