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What Caused The Economic Panic Of 1837

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The financial panic of 1837 was the result of President Andrew Jackson's disastrous economic policies. The Jackson administration

triggered an economic panic that led to a severe national depression. President Andrew Jackson's policies were blamed for triggering the panic, which caused many Americans to experience economic woes. President Andrew Jackson presidential term ended in 1836. His successor, Martin Van Buren, was forced to deal with the consequences of Jackson's actions. Although there is no single cause of this financial crisis, many attribute it to Jackson's political leadership and change in policy. While not the only cause, Jackson's elimination of the Bank of the United States played a key role in the economic crisis.

====The Elimination of the 2nd Bank of the United States==== During Jackson's presidency, his ~~Jacksonians~~ acolytes wanted to gain control of the economy and eliminate the nation's central bank, the Second Bank of the United States. This created a "bank war" when President Andrew Jackson vetoed a bill that would renew the bank’s charter and money policies. As a result, this caused many state banks to become insolvent due to their inability to access federal funds. Additionally, with President Andrew Jackson’s Specie Circular in 1836 all land purchases had to be made with gold or silver coins instead of paper money. This further limited the ability for banks to lend out money as they had less coins and gold in their vaults. This exacerbated the lack of capital and liquidity amongst state banks.

This caused numerous businesses to become bankrupt and the Whigs blamed President Andrew Jackson for his impatience and federal banks restraint upon bank credit. As a result, approximately eight hundred banks closed their doors and the economy was stifled. Jackson had removed government funds from the Second Bank of the United States, which he viewed as corrupt, causing a large amount of money to be in circulation. This removed restraints on banking, leading to an economic panic as banks recklessly lent money without sufficient capital.

====The United States began printing paper money====

The government began printing more paper money, and the 850 banks that began operating in the country started printing their own currency. This caused inflation and led to sky high unemployment. Banks loaned large sums to governments and businesses, as well as foreign governments, which ruined many businessmen in the United States. With no central bank to regulate it, each bank printed its own currency which further hurt the economy of the United States. Furthermore, without any regulation on banks or mints, they recklessly loaned out huge sums of money - something that could not be sustained indefinitely.

This caused a chain reaction when some of the most important state banks refused to accept the paper notes from other banks. This eventually led to the other banks halting specie payments, which in turn halted all banks. As investors began to withdraw their funds, these banks suspended both paper currency and specie payments, further depleting already falling monetary reserves. British investment bankers also refused to lend money, forcing deposit banks in New York City and other cities to suspend currency withdrawals as well. This crisis quickly spread throughout the entire financial world as investors rushed to withdraw their money from all sources.

====The Bank Panic and Cotton Prices==== This caused a bank panic, where people pulled their money out of banks, fearing that the banks would not be able to cover the withdrawals. The panic was compounded by the own financial troubles of many banks, when English banks stopped lending money to American Banks. This made it difficult for American ~~Banks~~ banks to scale their loans and caused many Southern Banks to fail. As a result, there were massive runs on vaults of major banks and other financial institutions as people scrambled to withdraw their money from these sources. This banking crisis created a domino effect on the American economy, with other industries such as real estate crashing due to lack of liquidity in the market and lower monetary reserves for lenders. The crisis was further worsened by plantation owners who had been cultivating many crops but pumping money into land speculation instead of reinvesting in their plantations.

This led to a bubble in cotton prices, which subsequently fell and caused severe financial losses for the farmers. This was exacerbated by the banking policies of the time, as banks had issued far too much currency, causing it to lose value and leading to further losses for farmers. In addition to this, fiscal and monetary policies of the time also played a part in the panic as they were unable to prevent the bubble from falling cotton prices or address movements collapsing land bubbles. The economic crisis was catastrophic for farmers, merchants, business owners and banks alike; hundreds collapsed as their losses ruined them.

https://economic-historian.com/2020/11/panic-of-1837/ 11

[[Category: United States History]] [[Category: Jacksonian America]] [[Category:Wikis]][[Category: Antebellum History]] [[Category: 19th Century History]] [[Category: Political History]]

#united states #andrew jackson #national bank #currency #economy #president andrew #inflation #investors #cotton prices #depression #martin van #financial crisis #specie circular #doors #growth

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