The Panic of 1819

V RESTRICTING BANK CREDIT:
PROPOSALS AND ACTIONS

Contrasting to proposals for expanding the money supply were suggestions for restricting bank credit such as placing curbs on the issue of bank notes or requiring banks to redeem in specie. They grew out of the grave problem of the defaulting and suspending banks, and of the widespread depreciation of their notes. The impetus came from both a belief that sounder banking would cure the panic by placing monetary and banking affairs on a firmer basis and the desire to prevent unsound bank credit expansion, and subsequent depression, in the future.

Secretary of Treasury Crawford, despite his toying with the idea of inconvertible paper, typified the opinion of those who wished to restrict banks and bank credit. In his Currency Report,1 he declared that in order to return to a specie convertible basis, superfluous banks must be eliminated. Banks should only exist in the principal commercial cities of each state. Small denomination note issues should be prohibited and banks should discount “nothing but transaction [commercial] paper payable at short date.”2 The maximum amount of these discounts should equal the total of savings and deposit accounts and half the paid-in capital. Then the banks would always be able to maintain convertibility. The present system of banking, Crawford declared, had banished specie by issuing paper in excess of the demand for transmitting funds and had fostered extravagance, idleness, and the spirit of gambling. Crawford stated that restraints on the banks were a responsibility of the state legislatures, although he conceded that the federal government had contributed to the spirit of speculation by granting credit on public land sales and through the extension of credit by the Bank of the United States.

Banks were largely state responsibilities. And so the problem of the banks was thrashed out largely on the state level. In Georgia, the legislature voted in late 1818 to penalize any incorporated bank refusing to pay specie on demand, and imposing a 2 percent per month interest penalty. This followed the defeat of a 3 percent per month interest penalty proviso in a bill to incorporate the new Bank of Darien. Another important measure passed in the same session—prohibition of the circulation of notes of unchartered private banks and of the issue of small denomination notes.3 In 1820, Georgia passed an act requiring annual reports from the banks, but it proved ineffectual.4

One of the methods of restraining bank credit expansion was to reject incorporations of new banks or to insert compulsory specie payment clauses in their charters. An indication of popular opinion was the presentment of a grand jury of Jasper County, a rural county southeast of Atlanta. The presentment asked for no further additions to bank charters.5 The Georgia legislature turned down several applications for new banks. It rejected a charter of a proposed Agricultural Bank of the State of Georgia by a two-to-one vote. This bank would have had an authorized capitalization of $1 million. The bank was rejected even after the charter was amended to include an absolute specie paying clause.

The Georgia legislature also rejected by a similar majority a bill to authorize the Marine and Fire Insurance Company of Savannah to issue its own notes and discount promissory notes. On the other hand, it passed the charter of a new bank at Augusta, over opposition, and enacted a charter for the Bank of Darien without penalizing failure to pay in specie.6

Virginia was a leading stronghold of hard-money opinion. Its leading statesmen, such as Thomas Jefferson, attacked any issue of bank paper beyond the supply of specie. As we have seen in the case of the Crawford Report, Thomas Ritchie, editor of the Richmond Enquirer, used sophisticated economic arguments to attack any suggestion of inconvertible paper schemes.7 Typical of Virginia opinion was an Enquirer editorial laying the blame for the crisis squarely at the doors of the banks. The only remedy was for the parasitic banks to be eliminated, with industry and economy allowed to effect a cure.8 Ritchie also urged that if bank paper be permitted to continue in existence, there at least be vigorous restrictions on all banks, whether state or national, private or incorporated. Small denomination notes must be prohibited and paper must always be convertible into specie. The least reluctance to do so should forfeit the bank’s charter.9

A writer from Petersburg, in southeastern Virginia, blamed the current plight on paper money and cited the French economist, Destutt de Tracey (whose work was being translated under the supervision of Thomas Jefferson), to the effect that when a merchant could not pay his debts, the best he could do was liquidate and to become bankrupt quickly.10

Another point of view was expressed by “A Virginian.” He suggested the abolition of all incorporated banking, instead placing reliance on private banks, the owners of which would be fully liable for their debts. Such banks, he declared, “cannot overtrade, that is, issue more paper than the market requires; their credit will not exceed its just limits.”11

Some writers, however, sounded a note of caution, stressing that bank note contraction should take place slowly, so as not to disrupt the economy unduly.12

A unique monetary plan was offered by Spencer Roane, the great Chief Justice of the Virginia Court of Appeals and the leading foe, on behalf of states’ rights, of Justice John Marshall’s loose constructionist decisions.13 Roane began by asserting that “banking is an evil of the first magnitude,” and in this sentiment he claimed the support of prevailing opinion throughout the United States. However, bank paper could not be eradicated and a return made to pure specie without causing “widespread ruin and distress.” How, then, to reform the banks? As long as they remained in existence, they must be controlled. The Bank of the United States was not the proper instrument for this control, for it possessed the nationwide power of increasing or diminishing the circulating medium at will. The United States Bank had a far greater potential for harm than did the state banks. On the other hand, the state banks needed a general central control, to produce uniformity of action and confidence in their issues and to see that they redeemed their notes. As a substitute for the present unsatisfactory system, then, Roane proposed “Banks which shall be local as to the extent of their patronage and power, but national as to their responsibility.” Roane—champion of states’ rights—suggested a Constitutional Amendment to prohibit the states from creating any bank corporations and to authorize the federal government to establish an “independent bank” in every state, with the assent of that state. Of the capital stock of each such bank, one-fifth was to be subscribed by the United States government, one-fifth by the state, and the remainder by the citizens of the particular state. Each bank was to have fifteen directors, all citizens of the state—three to be appointed by the federal government, three by the state government, and the remainder by the other stockholders. “The objection to the United States Bank, as at present organized, would not apply to [these] bank[s]. . . . The patronage of the directory and its power over the circulating medium, would be confined to the state where it should be located.” The Bank of the United States had compelled some branches suddenly to curtail their note issue, because of the independent and lax management of other branches. “An independent bank would be enabled to pursue a course regulated only by its own business and the balance of trade for or against the state where it should be located.” On the other hand, the independent banks would be incorporated by the federal government and would therefore be uniform throughout the country, and all compelled to redeem in specie.

It cannot be doubted that institutions that are relied on to afford a national currency, should be under national control. It would be as unwise to depend on state institutions for a medium of exchange, in which to receive the national dues, as it would be to depend on state authorities for the payment of those dues [i.e., the system of the Articles of Confederation].

The Constitution, Roane asserted, gave Congress the authority to regulate the currency of the country and prohibit such regulation to the states. This should apply to paper currency as well as to specie.

Virginia’s hard money contingent, in its distrust of banks, recognized that the Bank of the United States had inflated proportionately less than did the bulk of the state banks. However, like Roane, they feared the bank as having greater potentialities for evil. As Ritchie asked: state banks were certainly evil, but “what is there to control the power of the national bank?”14

The most famous and one of the most thoroughgoing opponents of bank credit was Thomas Jefferson. Jefferson reacted to the panic of 1819 as a confirmation of his pessimistic views on banks.15 He elaborated a remedial proposal for the depression in a “Plan for Reducing the Circulating Medium,” which he asked his friend William C. Rives to introduce in the Virginia legislature without disclosing authorship.16 The goal of the plan was bluntly stated as “the eternal suppression of bank paper.” The method was to reduce the circulating medium gradually to that “standard level” which pure specie would find for itself equally in the several nations. For this purpose, the state government should compel the complete and utter withdrawal of bank notes in five years, one-fifth of the notes to be called and redeemed in specie each year. Further, the state should make it a high offense to pass or receive any other state’s bank notes. Those banks who balked at such a plan should have their charters forfeited or be forced to redeem their notes. In conclusion, Jefferson declared that no government, state or federal, should have the power of establishing a bank. He envisioned a circulation consisting solely of specie.17

Governor Thomas Randolph, son-in-law and close friend of Jefferson, in his inaugural address in December, 1820, summed up the predominant Virginia attitude toward banks.18 Randolph stated that only specie, never paper, could be a measure of value. Specie, in universal demand, had a relatively stable value, while banks caused great fluctuations in the supply and value of money, with attendant distress. Randolph looked forward to the day when eventually the whole revenue of the government would be collected in specie only. He was willing to see the state print paper money, provided that it be absolutely convertible in specie and guaranteed to be equal in value to the specie owned by the state—in short, a 100 percent reserve program.

In Delaware, the restrictionist forces kept up a running fight with the expansionists and advocates of relief legislation during the 1819 and 1820 sessions. The restrictionists made their first move in the House upon submission of the report of the Brinckle Committee to consider the state of the paper currency. Representative Martin W. Bates of Kent County moved to reject that part of the committee’s report which declared it inexpedient to compel the banks to resume specie payment. Bates’s motion carried the House by one vote and had the support of Representative Henry Brinckle, himself, but of no one else on the committee.19 The House had not yet passed a compulsory resumption bill, however. In the next session, Brinckle introduced a resolution to establish a committee to introduce the required bill.20 Brinckle’s bill passed numerous tests in the House, albeit by one vote, but the Speaker of the House took the unusual step, on final passage, of personally voting nay, and thus blocking the resolution by a nine-to-nine tie.

In Maryland a leading expression of hard money sentiment was a citizens’ meeting at Elkton, in the extreme northeastern end of the state, referred to previously. Not only did the “farmers and mechanics” of Cecil County pledge themselves to refuse to take the notes of nonspecie-paying banks but they proceeded to denounce the banks and call for strict laws to compel specie payment.21 They “viewed with abhorrence” the alarming increase of “fictitious capital” furnished by banks, they assigned the principal causes of the “decline of agricultural, mercantile, and mechanical interests” to the banks, and they pledged themselves not to vote for any candidate that would not pledge to vote to compel specie payment by the banks. The meeting also passed resolutions of gratitude to Hezekiah Niles, editor of Niles’ Weekly Register, and to the late State Representative Matthew Pearce, for their staunch anti-bank leadership.22 The resolutions were widely reprinted throughout Maryland and also in the Niles’ Weekly Register. They were denounced in the Baltimore Federal Gazette by its editor, William Gwynn, as slanderous; Gwynn charged that the citizens had been duped by Niles. Niles quickly retorted that Gwynn was himself a bank director.23

Niles by no means advocated complete abolition of bank paper, however. His suggested remedies for the financial troubles: (1) cease granting corporate charters to banks; (2) make bank stockholders fully liable; and (3) enforce payment of all specie demands.24

The Maryland hard money advocates did not succeed in tightening the laws against banks not redeeming in specie, but they succeeded in blocking any action for monetary expansion by the legislature.

One of the leading bank restrictionists of the period was Daniel Raymond, a Baltimore lawyer, who in 1820 wrote Thoughts on Political Economy, the first systematic treatise on economics published in the United States.25 Raymond set forth a virtual 100 percent specie-reserve position on banking. Bank notes, he maintained, should be confined to bank capital. Raymond criticized the assertion of Adam Smith and Alexander Hamilton (whom he otherwise greatly revered) that bank notes added to the national capital in so far as they substituted for, and economized on, specie.26 In reply, he cited David Hume that “in proportion as money is increased in quantity, it must be depreciated in value.” An issue of paper money therefore had the same effect as debasing the coinage. The increase in price raised the prices of domestic goods in export markets and caused an unfavorable balance of trade. Bank credit also promoted extravagant speculation. Ideally, Raymond believed that the federal government should eliminate bank paper entirely and supply the country with a national paper fully (100 percent) representative of specie.27 If this could not be accomplished, then Raymond suggested that banks be subjected to government control. Government would have a monopoly on the manufacture of paper, which it would give to banks, while regulating the maximum amount that they could lend in proportion to their capital. If this plan were not adopted, Raymond’s third choice was government’s taxing bank profits above the going rate of interest, thus eliminating the motive for increasing bank paper.

Another advocate of 100 percent reserve, signing himself “A Farmer,” was asked, in the course of a debate in the pages of the National Intelligencer, by a “Brother Farmer”: What would become of the farmers if the banks were annihilated? “Farmer” answered that they would no longer have debts or bankruptcies and that their income would then be in undepreciated specie.28 Joining in the antibank sentiments, “A Stockholder” hailed the current credit liquidation and hoped that the purification process would continue until all banks were eliminated.29

In the District of Columbia there were proposals to consolidate the three banks of the district into one bank. These proposals were not adopted, however. Typical of the attacks upon it was one by “Nicholas Dumbfish,” who assailed the consolidation as assisting “in perpetuating this wretched system of paper, which, if left to itself, will expire, whether by its own limitation or by the total and irretrievable loss of public confidence.” Better to let these institutions die a natural death.30

New York was one of the main centers of monetary restrictionist sentiment. Typical was the famous Address of the Society of Tammany to its Absent Members, which circulated throughout the country. The report was written by John Woodward, and among its signers were the Grand Sachem of Tammany (then as now in political rule of New York County), Clarkson Crolius, and secretary James S. Martin.31 The Address frankly lambasted banks as being “poisonous.” In particular, it attacked bank loans to agriculture. Banks might be useful in rapidly liquidating commercial transactions, but could only bring ruin to agriculture. The Address recommended total abolition of bank loans to agriculture, as well as the forfeiting of the charters of any banks refusing specie payment. The Society of Tammany itself, however, when passing recommendations for remedies of the depression a week later, omitted banking from the list.32

The Tammany Address was widely circulated and considered, and drew comments and letters from many famous statesmen. James Madison, for example, wrote to Crolius praising the report. He declared that even when banks restricted their operations to temporary loans to persons in active business, promising quick returns, they were likely to be harmful. There was no doubt of the mischief involved in banks’ lending indiscriminately and at long term.33

One of the leading figures of New York State, Judge William Peter Van Ness, pseudonymously published a pamphlet advancing two restrictions on banks: (1) they may discount no “accommodation paper,” i.e., simple loans that were not self-liquidating in the course of active trade; and (2) that they grant no renewals of loans.34 Van Ness reasoned that failure to follow this rule had caused the depression; for when a bank loaned so as to constitute, rather than merely supplement, the capital of a merchant, it thereby sponsored “adventurers” rather than sober businessmen. Accommodation paper, furthermore, was created for the sole purpose of being discounted, whereas “business paper” arose from the actual sale of a good.35 Van Ness believed that the Bank of the United States could aid greatly in furthering such a program.

The New York City press had largely restrictionist views. The New York American concluded that the true remedies for the depression were: “The gradual . . . but flexible reduction of bank discounts, refusing to incorporate any new institutions, compelling those which exist . . . to redeem their notes in specie . . . or forfeit their charter.”36

One unique approach to the monetary problem appeared as an anonymous pamphlet on currency and credit.37 “Seventy-Six” attacked paper and bank credit. He was unique in advocating a grain standard instead of a specie standard. He argued that grain must really be the best money since people resorted to barter in grain as a last ditch measure.

A significant report on the New York situation was delivered by Assemblyman Michael Ulshoeffer, from New York City, of the Committee on Currency.38 Ulshoeffer’s task was to investigate remedies for the disordered currency. As he explained, “the great object in view is that the various banks should redeem their notes promptly in specie, and that such notes should pass at their par value in every part of the state.” The enormous banking capital in the state should be reduced, he demanded, and only a vast retrenchment in the paper money supply, and its prompt redemption, would effectively restore paper to par throughout the state. It was true, he conceded, that public opinion governed the value of all paper money, and that the public must be trusted to distinguish between good and unsound banks. Yet, laws might aid public opinion and restore public confidence. The state banks, he charged, had refused to redeem their notes, had kept their offices closed, and had placed all manner of obstacles in the path of redemption, while continuing to lend and circulate their notes. Therefore, Ulshoeffer recommended that the state treasurer not receive notes of any bank not promptly redeeming in specie, or not passing at par in the principal cities.

Governor De Witt Clinton, in his message opening the 1819 session of the legislature, implicitly called for an end to new bank charters for the present, indicating that the multiplication of banks was one of the main causes of the current depression, and stating that he had always been opposed to this expansion.39 Clinton charged that investing banks with the power to coin money instead of issuing paper would be less pernicious, since at least the coins would have intrinsic value. Taking this section of the Governor’s speech as a point of departure, the Senate and Assembly appointed a Joint Committee on the part of the Governor’s speech dealing with currency. The report of Chairman David Allen, of the Eastern district, concluded it inexpedient to grant any more bank charters.40 The Allen Report particularly attacked overextension of banking as one of the major causes of the depression. The banks were all right when confined to commercial centers, where they invigorated trade. But banks overextended when they began to establish themselves in remote agricultural areas, emitting “excessive issues of bank notes without the means of redeeming them,” and the depreciation of their notes.41

One of the most astute writers in the press of the period was “Senex,” who had his own solution for the problem of the country banks in New York.42 He explained that pernicious effects of country banks’ overissue stemmed from their having opened accounts with sound city banks, the latter thus assuming the liabilities of the former. After accepting country bank notes on deposit, the city banks felt bound to redeem the country notes in specie, both from want of foresight and out of the desire to please their customers. If they had not done so, the country notes would have circulated only in their local areas. The remedy was simple: the city banks should refuse to support these worthless notes. This would “reduce the amount of floating paper money by substituting metallic currency in their place.”

There was no great need in New York for legislative action to enforce specie payment, since it had been largely taken care of in the 1818 session, before the panic had started. New York had then passed a bill compelling any bank to pay its notes in specie or Bank of United States notes, or suffer a payment of penalty interest to the noteholder. The strength of the proponents was seen in their defeating, by a two-to-one margin, Senator Martin Van Buren’s attempt to vitiate the bill almost completely by exempting notes already in existence from its provisions. The legislature, in the same session, also prohibited any private, unchartered banking whatsoever, whether for purpose of note issue, deposit, or discount.

The most dramatic bank crisis in New York City during the depression was the failure of Jacob Barker’s Exchange Bank, a private bank of unorthodox principles which had been established in New York City, a stronghold of financial conservatism. Barker had secured an exemption for three years from the legislative ban on private banking, but he went insolvent as soon as the panic arrived.43 He was moved to pen a rather remarkable apologia for his actions.44 Barker’s pamphlet depicted a virtual morality play. His bank was begun after the war as a humanitarian gesture, doing its business mainly “with mechanics and residents of the neighboring counties, who were unable to obtain accommodations from other banks.” Barker’s rivals, the corporate banks, were angry because of this benevolence and conspired to wreck the bank. Barker was able to withstand all the wicked maneuvers, until pressure for redemption somehow built up from various sources, and he was forced to suspend specie operations, which in New York meant to go out of business.

A rebuttal pamphlet, printed anonymously, put its finger on a common point of restrictionist attack: small denomination notes.45 “Plain Sense” pointed out that Barker’s notes were overissued and, consequently, were now exchanging at a 45 percent discount. Particularly evil was small note circulation, and Barker’s Bank was especially active in issuing small notes, which circulated among the poorer classes and “increase the change in favor of the banker” through destruction, accidents, etc. Furthermore, such people accepted the notes, even when depreciated, out of ignorance or necessity. The author advocated that banks be prohibited from issuing notes under $20. Such prohibition would restrict the area of their circulation; “notes would constantly be flowing into the hands of men having large capitals, and engaged in extensive transactions, who would return them into the bank for payment when they came into their hands.” The public would then be safe, and the banker would have to confine himself to fair profits “arising from the employment of his real capital.”

Another writer, using the signature “A Merchant,” pointed out a second major argument against small note issue: that it leads to rapid disappearance of specie from circulation. He urged that the New York legislature follow the lead of Pennsylvania, Maryland, and Virginia and prohibit all notes under $5 denomination.46

Anti-bank sentiment was strong in Pennsylvania, which, as seen, was a battleground for expansionist proposals. As the panic arrived, alongside petitions for monetary expansion came petitions for coerced specie payment. Requests bombarded the legislature for liquidation of the charters of all the banks that had suspended specie payments, and for rendering the property of individual stockholders fully liable. Some of the petitions went so far as to urge revocation of all bank charters in the state. Conspicuous in sending such petitions were Mifflin County in central Pennsylvania, neighboring Union County, and Bucks County in the extreme eastern part of the state.47 In far west Pittsburgh, the Republicans of the district (and the Republicans were the only effective political party in the state), and all Republican candidates for office, favored a compulsory specie payment law.48 These Republicans also favored a tax against the Bank of the United States. In both of these demands, they were endorsed by the Pittsburgh Statesman.49 State Senator Condy Raguet, in the course of his very extensive inquiry into the extent of the depression in Pennsylvania, sent a questionnaire to leading citizens as well as legislators in each county, sampling opinion on the depression. One of his questions was, “Do you consider that the advantages of the banking system have outweighed its evils?”50 Of the nineteen counties sampled, sixteen answered in the negative, and these covered all areas of the state.

Raguet, who concluded that the depression was caused by bank credit expansion in the boom and subsequent contraction when specie drained from bank vaults, urged that every new or renewed bank charter have the following restrictive provisions:

(1) a penalty of 12 percent interest per annum and forfeiture of the charter, should any notes or deposits not be redeemed in specie on demand. (This was the most important provision.51 The inclusion of deposits with notes was characteristic of Raguet, who pioneered in emphasizing their simultaneity in constituting the money supply.)

(2) loans to be limited to 150 percent of paid-in capital.

(3) all profits over 6 percent to be divided equally between stockholders and the state.

(4) prohibition on borrowing from a bank by one of its directors, also ban on a bank director’s holding legislative office.

(5) annual inspection of bank accounts.

(6) prohibition of small notes under $5 denomination.

(7) no bank should be permitted to buy its own notes, or notes of any other bank, for less than par. (This was to check the speculative practice of country banks’ buying their own notes in the city at a discount, instead of having to redeem them at par.)

(8) no bank should be able to own any securities of the United State government, or its own stock, or the stock of any other corporation. (The purpose of banks, as gleaned from their charters, wrote Raguet, was to accommodate merchants, farmers, mechanics, and manufacturers, and not to lend to stock speculators. Investing in government securities was a particular spur to speculation, since the greater marketability of government bonds caused government to issue more notes than it would otherwise.)

(9) no loans on security of bank’s own stock.

(10) a required contingency fund for redemption of 10 percent of the bank’s capital.

Although Raguet was decidedly unsympathetic to the existence of any banks aside from those with 100 percent reserve for their demand liabilities,52 he doubted whether repeal of existing charters was expedient. Instead, he advocated inserting the provisions listed, before any charters were renewed. For existing banks in suspension, Raguet recommended that the charters not be renewed, that they be prohibited from making any new loans or note issue, and that they be given three to five years to collect their debts and wind up their affairs.

Similar calls for restrictions on banks, particularly for the forcing of specie payment, were made in William Duane’s Philadelphia Aurora.53 Duane advocated compulsory specie payments and full individual liability for banks’ stockholders. Similar provisions had unfortunately been turned down in 1814, when forty-two new banks were incorporated. And now, as then Governor Simon Snyder and other critics had predicted, those rural counties which had been the most enthusiastic supporters of bank expansion were “the most distressed and impoverished,” and the same areas were petitioning the legislature to confine all banks to cities.

“A Pennsylvanian,” in an article in the Philadelphia Union, in the course of an open letter to the Raguet Committee, recommended the following provisions in bank charters:

(1) no bank may refuse to redeem its paper when it has specie in its vaults (a milder provision than recommended by Raguet).

(2) no bank suspending payments should be allowed to issue paper or declare dividends.

(3) directors of suspending banks must call on stockholders not yet paid in full, and sue defaulting stockholders.

(4) every director to be individually liable for the paper. The writer asserted that these measures, in addition to ending fraudulent practices, would prevent future depreciation of bank paper, reduce bank paper outstanding, and increase its value.54

The Pennsylvania legislature began restricting bank expansion in late 1818, at the urging of former Governor Snyder, now a State Senator. It passed resolutions compelling suspended banks to make public statements of their affairs and prohibiting them from declaring dividends during the period of suspension.55 In the spring of 1819, Pennsylvania annulled the charter of any bank refusing to redeem its notes in specie, except for the very important case of brokers who had bought the notes at a discount.56

In 1819, the Pennsylvania legislature passed a law forfeiting the charter of any bank established under the mass incorporation act of March, 1814, which, after August of 1819, should refuse to redeem its notes in specie. Stockholders and directors would be individually liable and there would be a 6 percent interest penalty on the bank.57 In 1820, the Pennsylvania General Assembly suggested a constitutional amendment prohibiting the United States Bank from having branches within the states.

In Rhode Island, the panic quickly led to abolition of the state’s peculiar system of debt collection—particularly speedy in the case of a bank collecting from its borrowers, as compared to creditors trying to collect from the bank. Another step taken by Rhode Island, in June, 1820, was to prohibit banks from circulating notes in excess of their paid-up capital. This was not really necessary in a state with conservative banking.58

Vermont had passed a stringent law, in 1817, prohibiting the circulation of non-specie paying bank notes, so that the hard money forces needed mainly to repulse expansionist programs, which in Vermont consisted largely of appeals for chartering new banks. One intense dispute took place over a phenomenon peculiar to Vermont the fact that there were many private Canadian bills in use in the state as money. A bill was presented in the legislature to prohibit the circulation of Canadian private notes; this bill almost passed, but was finally rejected. In the meanwhile, the opposition attempted to pass a law compelling the state to receive Canadian notes for taxes and debts due, but this was summarily dismissed.59

In New Hampshire, hard money forces, led by former Governor William Plumer, caused a great stir in the 1820 session, by petitioning the legislature against any charter renewals for banks. The suggestion was tabled by the legislature.60

A New England writer, “O.,” brought up an acute point: one cause of excess bank credit expansion was the banks’ agreement between themselves to accept and exchange each others notes. In effect, they borrowed from each other without paying interest. “O.” saw perceptively that competition between numerous banks could restrict the total supply of bank notes, for each bank could only issue its notes to a narrow, limited clientele, beyond which the notes would be returned to the bank quickly for redemption. Interbank agreements could suspend this force. Therefore, “O.” recommended that legislatures consider such agreements to be violations of bank charters.61

Thomas Jefferson’s thoroughgoing opposition to paper money was heartily concurred in by his old enemy and current friend, Massachusetts elder statesman John Adams. Adams, writing to his old Jeffersonian opponent, John Taylor of Caroline, denounced banks roundly and placed the blame for the depression on their shoulders. Paper money beyond the value of specie he considered to be “theft” and bound to depreciate as in the case of debased coins.62 He cited a similar abysmal failure of paper money in Massachusetts in 1775, which was quickly and efficiently replaced in circulation by silver.

John Adams’ son, Secretary of State John Quincy Adams, had similar views on bank paper at that time.63 A plan for government paper money had been sent to him by a Frenchman, Peter Paul De Grand. Adams wrote De Grand that he would send the plan on to Secretary of Treasury Crawford, but that he himself felt that it would create fictitious capital. He commended to De Grand the Amsterdam bank system, where paper was “always a representative and nothing more”—a 100 percent equivalent of the specie in the banks vaults.

In Indiana, a bill in 1821 to prohibit issue of irredeemable bank currency failed in the legislature,64 although a citizens’ meeting in Washington County, across the river from Louisville, denounced the entire banking system as a destructive and fraudulent monopoly.65 Missouri outlawed private unchartered bank notes in 1819.66 In Ohio, Governor Ethan Allen Brown laid the blame for the depression on excessive bank credit and declared the only remedy to be the gradual reduction of bank paper, which would revive the credit of the banks.67 As early as the beginning of 1819, a Committee on the State of the Currency and Banks of the Ohio House recommended that the law against private unchartered banks be enforced, and that inquiries be made into the conditions of banks not reporting their accounts.68

The depth of sentiment throughout the West against banks in general and the Bank of the United States in particular, for their excessive expansionist and contractionist activities, was revealed by incidents in rural Ohio. In the fall of 1819, General William Henry Harrison, later President of the United States, was a successful candidate for the Ohio State Senate. A citizens’ meeting before the elections criticized him for being a director of a local branch of the Bank of the United States. Harrison, in a lengthy reply, insisted he was a sworn enemy of all banks and especially the Bank of the United States.69 He declared that he was unalterably opposed to the establishment and continuance of the United States Bank.

The major energies of Ohio during this period, in fact, were occupied by its famous war against the Bank of the United States. This war was not depression-born, having begun in late 1817 with a proposal to tax the business of the bank’s Ohio branches, in order to drive them out of the state. The tax was defeated in this session, but carried overwhelmingly in February, 1819, after the anti-bank forces had triumphed in the fall elections of 1818. Leader in the fight was Representative Charles Hammond, from Belmont County.70 Anger at the bank was compounded of three elements: inflationists’ irritation at the bank’s contractions and calling on state banks for redemption; hard money resentment at the bank’s expansionist activities during the boom; and general political anger at a privileged “money power.” The law that levied a tax on the bank also imposed the same tax on all unincorporated banking in the state, thus revealing the predominance of general anti-bank opinion in Ohio. Attempts to tax or penalize the bank were struck down in famous United States Supreme Court decisions—Maryland’s in McCulloch vs. Maryland (1819) and Ohio’s in Osborn vs. Bank of United States (1824).71

In the frontier town of Detroit, in Michigan Territory, the citizens became aroused about the depreciated state of their circulating medium, which consisted principally of Ohio bank notes. In early 1819, they organized a meeting to deal with the depreciated small-change notes which individuals were issuing and circulating. The meeting pledged the members not to accept any individual change notes that were not redeemable within three days after demand for redemption.72 In December of the same year, the leading citizens of Detroit held a meeting over the depreciated state of Ohio bank notes. They noted in alarm that the recent suspension of specie payment by these banks opened the door to a much greater depreciation. Therefore, the citizens resolved that those banks not redeeming their notes in specie were unworthy of confidence. The meeting appointed a committee of five to inquire into the condition of all the banks whose notes were circulating in Michigan, and to publish their results periodically in the Detroit Gazette. The committee was also directed to inquire into the status of individuals issuing small notes.73

The citizens of Detroit also took action against clipped, or “cut,” silver, which made its appearance in force during the panic. The Detroit Gazette urged its readers to accept cut silver only by weight, and not at face value. A year later, in August, 1821, a large meeting of Detroit citizens resolved to refuse to accept cut silver coins, and to do all they could to discourage their circulation. This voluntary action effectively ended cut coin in Detroit.74

The state of Tennessee saw a concerted drive by hard money forces at the same time that expansionists were pushing their proposals. A petition from Warren County, a rural county in mid-Tennessee, demanded bluntly that banks be placed on a plane of “constitutional equality with the citizens,” by compelling them to redeem their notes in specie. Refusal should entail a penalty interest on the bank, and stockholders should be personally liable. Similar petitions were received from Smith and Giles Counties, in mid-Tennessee.75 A bill to compel specie payment or suffer an interest penalty was introduced in the House in the late 1819 session, by the hard money leader, Representative Pleasants M. Miller of Knoxville. The bill passed the House by a 20-to-14 vote, but was rejected in the Senate.76 Representative J. C. Mitchell, of Rhea County in East Tennessee, proposed instead to make all real and personal property of bank stockholders liable for bank debts, but the House spurned this for the stronger Miller bill.77 After assuming office in 1821, Governor William Carroll turned the tide of the state’s expansionist legislation and called for coerced resumption of specie payments, a step which was eventually adopted. One point of interest for the later post depression years was that the young future President James K. Polk, a wealthy cotton planter, began his political career with a staunch advocacy of return to specie payments. Polk maintained that specie payments were essential for confidence and in order to end depreciation.78 Polk also proposed a measure to speed up execution against the property of any bank that might refuse to pay specie. Joining young Polk at this time was the frontier representative from western Tennessee, Davy Crockett, who “considered the whole Banking system a species of swindling on a large scale.”79

A great deal of anti-bank sentiment was expressed in Kentucky during the controversy over inconvertible paper schemes. State Senator Jesse Bledsoe, from Bourbon County, delivered a speech which was later reprinted in pamphlet form. The speech was essentially a denunciation of the banking system as the cause of the depression through granting credit, thereby generating debt burdens and bankruptcies. Bledsoe called for the abolition of incorporated banking and compulsory redemption in specie by the banks.80

Amos Kendall, influential editor of the Frankfort (Ky.) Argus, and a future Jacksonian advisor, became a bitter opponent of the entire banking system as a result of the depression.81 The very thought of banks he found “disgusting.” The best method of rendering them harmless, he felt, was simply to prohibit them by constitutional amendment. If, as seemed likely, such a step was not politically feasible, then the next best step was to require every bank to give a security fund to the courts to provide for payment for their paper. This requirement, he believed, would insure that all liabilities could be redeemed (in effect, a 100 percent reserve plan) and would be more effective than to require individual stockholder liability.

As soon as the panic struck, Governor Gabriel Slaughter quickly called for action to restrict the banks.82 He advocated making stockholders and directors individually liable for bank notes. Ideally, Slaughter sought a federal constitutional amendment to outlaw all incorporated banks.83

In the Kentucky legislature, Representative John Logan from Shelby County, near Frankfort, proposed a set of resolutions to investigate the mass chartered “independent” banks with a view to repeal the charters of those found violating their requirement to pay specie on demand. These banks, forty in number, had opened in the spring of 1818, expanded their notes rapidly, and were now refusing to redeem. They had an aggregate capital of $89 million.84 Representative Thomas C. Howard, of Madison County, south of Lexington, attempted to amend the resolution to repeal immediately the charters of all the independent banks. The resolution for investigation passed overwhelmingly, but the repeal measure was beaten by a three-to-one margin.85

Kentucky moved swiftly against the banks. In early 1819, the bank committee reported to the House a rather mild bill along the lines of Slaughter’s message. It required that banks pay a tax of ½ percent per month on their capital, that the directors be individually liable for the notes of their bank, and that there be “double liability” for stockholders. When the bill reached the floor, there was a flurry of attempts both to weaken and strengthen the measure. The pro-bank forces succeeded in including an amendment requiring the state treasury to receive the notes of all banks complying with the bill. They failed by a two-to-one vote to require the state to receive the notes of all banks incorporated in Kentucky, regardless of what provisions they followed.

The restrictionists passed far stronger amendments. One was a proviso requiring the state to refuse any notes in taxes unless the bank, each year, bonded with an auditor security in pledge that the banks pay all demands in specie. This passed by a two-to-one vote. An amendment to extend the provisions from the “independent” banks to all banks in the state failed by two to one. Finally, the legislature passed the bill restricting the action of the independent banks.

In January, 1819, there was also introduced into the legislature a very vigorous series of anti-bank resolutions. They charged that banks were a moneyed monopoly and substituted speculation for production. They concluded that banks should be abolished by the federal government and the states. No action was taken on this proposal.86 Early in the 1820 session, the legislature finally repealed the charters of the independent banks, ending also their mass of depreciated notes. Almost all these banks had suspended payments by mid-1819.87 The bill, commended heartily by Niles, passed by a two-to-one vote in the House and by a narrow three-vote margin in the Senate.88

Restrictionist proposals in the federal arena concentrated, of course, on the activities of the one federally chartered bank, the Bank of the United States. Representative John Spencer, from upstate New York near Onondaga, and chairman of the famous committee that had revealed some of the malpractice of the bank, introduced a resolution to forfeit the bank’s charter unless it accepted restrictions on its activities.89 These included provisions against fraud in the purchase of bank stock, reduction of its capital, and a maximum limitation of $5 million of bank holdings in United States bonds. Spencer withdrew his proposal after he saw that there was no chance for adoption. Representatives David Trimble from the vicinity of Lexington, Kentucky, and Joseph Johnson from northwest Virginia, went further to propose outright repeal of the bank charter. Trimble declared that the bank had failed in two of its original purposes—equalizing exchanges within the country, and checking the paper issues of local banks. On the contrary, it had contributed to excessive credit expansion by waiving the collection of stock installments in specie. He predicted that if the bank continued in operation the currency would only be further depreciated and deranged. Representative James Pindall, from northwest Virginia, denounced the bank for expanding its issues, as well as for withdrawing needed specie capital from other banks.

The Trimble Bill failed by an overwhelming margin. Indeed, the only restriction on the bank that passed was a bill by Representative Burwell Bassett from eastern Virginia, to prohibit any director of the bank from dealing in its own stock.90

Except for these proposed restrictions or abolition of the Bank of the United States, Congress had little chance to consider the banking problem. One interesting pronouncement, however, was a report in February, 1820, by Representative Joseph Kent, of Maryland, from the outskirts of Washington. Kent, Chairman of the District of Columbia Committee, reported on a proposal to consolidate the banks in the Capital territory.91 Kent opposed compulsory consolidation. He stated that competition in banking was salutary, and that while banks were injurious, there would be no remedy in suddenly prostrating them. Instead, the evil excesses of banking were currently being corrected through failures and lowered profits.

One of the few leading citizens opposing severe restrictions on banking from a point of view not simply expansionist, was the influential New York merchant, Churchill C. Cambreleng.92 He declared banks only secondarily responsible for the economic evils, since they were not the only creators of “fictitious capital.” If bank credit were suppressed, other forms of credit would replace it. “Legislatures might as well attempt to confine the wind—as to encircle credit with legal restrictions.” Cambreleng, however, was by no means in favor of unrestrained banking action. On the contrary, he believed that unincorporated private banks injured trade and property and should be eliminated. Incorporated banks were beneficial, but they must be rigidly regulated by the government, namely: there should be a maximum limit on the amount of paper issued; annual statements and reports by banks should be required; and banks should be compelled to pay specie on penalty of a 12 percent interest payment. Such regulations, asserted Cambreleng, were particularly needed in the southern and western states.

Thus, monetary restrictionists did not all limit themselves to opposing inflationist schemes and calling for enforcement of specie payment by the banks. Many went further to suggest regulations of banks to facilitate the maintenance of specie payment. Quite a few wanted to confine banks to the principal commercial cities, to prohibit notes of small denominations, or to confine bank loans to short-term commercial discounts. Some believed that vigorous competition between banks would suffice to restrict the note issue of each. They saw that interbank agreements would thwart such restriction and concluded that such agreements should be outlawed. Many leading restrictionists proceeded onward to condemn all banks, and either recommended outright repeal of all bank charters or an enforced 100 percent specie reserve. This position is particularly interesting, as it predated the enunciation of the similar Currency Principle in Great Britain.

It is clear, once again, that hard money opinion was not stratified along geographical or occupational lines. Restrictionist sentiment ranged from such eminent and disparate leaders as Thomas Jefferson and John Quincy Adams to obscure western farmers. Hard money opinion was particularly strong in Virginia, New York City, and New England, but it permeated every state and territory in the Union. Party lines meant little, for ultra-hard money sentiments were echoed by arch-Republicans and Federalists alike. In New York State, the two bitterly disputing Republican factions (De Witt Clinton, and Van Buren-Tammany) both upheld a sound money position. Hard money leadership was abundant and influential in the West as well, although wealthy and influential leaders of opinion were also ranged on the other side of the fence. Furthermore, it cannot be said that commercial towns favored one or the other of the monetary positions—expansionist and restrictionist—while rural areas favored another. Each subdivision of each geographic region engaged each other vigorously in the press, and disputants often came from the same county. Taken all in all, it is fair to say that the majority of leading opinion was on the hard money side, at least to the extent of supporting specie payment and opposing inflationist plans. Only a minority of restrictionists pressed further for more drastic measures against bank paper.

The Panic of 1819 intensified hostility against the Bank of the United States, and enmity toward the bank grew throughout the country. Aside from long-standing hostility on general political or constitutional grounds, opponents of the bank consisted of the uncompromising wings of two diametrically opposed camps: the inflationists who wanted inconvertible government paper, and the hard money forces who criticized the bank for acting as a national force for monetary expansion. Historians portraying the struggle over the Bank of the United States have often overlooked, or slurred over, this critical distinction.93 The Jacksonian war against the bank has often been depicted as an inflationist battle against central bank restrictions on credit. Yet the opposite viewpoint, which realized that the bank’s nationalizing force was a powerful engine of credit expansion, was also important, as evidenced by hard money attacks on the bank during the 1818–21 period.

Another major area of controversy generated by the depression presented far more clear-cut sectional and occupational features than the monetary debates; this was the tariff question.

______________

94Crawford, Report, p. 15.

95Also see “Agricola,” in Washington (D.C.) National Intelligencer, April 21, 1819, December 31, 1819; January 11, 1820; and “A Farmer,” March 25, 1819.

96Georgia General Assembly, Journal of the House of Representatives, 1818–19 (December 1, 1818): 56; (December 10, 1818): 76ff. For an attack on excessive bank paper, see Washington (Ga.) News editorial reprinted in the Washington (D.C.) National Intelligencer, August 4, 1821.

97Heath, Constructive Liberalism, p. 188.

98Niles’ Weekly Register 15 (September 19, 1819): 59.

99Georgia General Assembly, Journal of the House of Representatives, 1818 (November 18–20, December 1, 1818): 31–40ff.

100Also see Ambler, Thomas Ritchie, p. 76.

101Reprinted in Philadelphia Union, June 4, 1819. Also see the Richmond Enquirer, July 16, 1819.

102“On Crawford’s Currency Report,” in Richmond Enquirer, March 21, 1820.

103Washington (D.C.) National Intelligencer, March 2, 1819.

104“A Virginian,” City of Washington Gazette, December 22, 1818. “Philo-Economicus” cited Adam Smith in support of the abolition of corporate banking. The reference was erroneous, since Smith had expressly asserted the advantages of the corporate form for the banking business. “Philo-Economicus,” Richmond Enquirer, June 1, 1819; Adam Smith, Wealth of Nations, pp. 714–15.

105“Quaesitor,” Richmond Enquirer, June 1, 1819; and “Colbert,” November 16, 1819.

106“Amphictyon” (Roane), “Hints in Relation to a General Reform of our Banking System,” Richmond Enquirer, April 18, 1820. Roane’s article is omitted from the collection of his writings in the Enquirer published in the John P. Branch Historical Papers, Randolph Macon College (1904–05): vols. 1 and 2.

107Ritchie on Crawford’s Currency Report, Richmond Enquirer.

108Jefferson to John Adams, November 7, 1819, in his Writings, Bergh, ed., vol. 15, p. 224.

109Jefferson to William C. Rives, November 28, 1819, ibid., 15, pp. 229–32.

110Jefferson to Charles C. Pinckney, September 23, 1820, in ibid., 15, p. 279. Also see Jefferson to Hugh Nelson, March 12, 1820, ibid., p. 258; Jefferson to A. Gallatin, November 24, 1818; December 26, 1820. Also see Washington (D.C.) National Intelligencer, March 2, 1819.

111Virginia General Assembly, Journal of the House of Delegates, 1820–21 (December 4, 1820): 11–12.

112Delaware General Assembly, Journal of the House of Representatives, 1819 (February 3, 1819). Only one of the legislators voted for both compulsory resumption and the relief proposals.

113Ibid., 1820 (January 29, 1820): 109–14. Apparently, it was the general practice in the state for a bank simply not to appear in answer to a summons against it, and the court would thereupon dismiss the case. Brinckle’s bill provided that in such cases judgment against the bank be recovered by default.

114Niles’ Weekly Register 15 (September 12, 1818): 33.

115For commendations of Niles for his anti-bank paper stand, from citizens of Tennessee, Maryland, and Virginia, see Niles’ Weekly Register 15 (September 5, 1818): 36.

116The Federal Gazette, in fact, took the lead in calling for a general suspension of specie payments. See the criticism in the New York Daily Advertiser, March 23, 1819.

117For example see Niles’ Weekly Register 16 (August 1, 1818), 377; 15 (September 19, 1818), 58, 245; 20 (March 7, 1821): 36.

118Daniel Raymond, Thoughts on Political Economy (Baltimore: F. Lucas, Jr., and E.J. Coale, 1820). A second, more widely known edition was Elements of Political Economy, 2 vols. (Baltimore: F. Lucas, Jr., and E.J. Coale, 1823). On Raymond, especially his pro-tariff views, see Dorfman, Economic Mind, vol. 2, pp. 566–74.

119On this question, see also “A Virginian,” “Reflections Excited by the Present State of Banking Operation in the United States,” City of Washington Gazette (December 22, 1818); “A Merchant,” Boston New England Palladium, June 8, 1819; “Colbert,” Richmond Enquirer, November 16, 1819.

120Raymond, Elements, vol. 2, pp. 132 ff.; also see vol. 1, pp. 248–53.

121Washington (D.C.) National Intelligencer, March 22, 1819.

122“A Stockholder,” Baltimore Federal Republican, May 27, 1819, reprinted in Washington (D.C.) National Intelligencer, June 21, 1819. Also see “Cato,” National Intelligencer, June 19, 1819; Philadelphia Union, June 4, 1819; “Piano E. Sano,” Boston New England Palladium, January 18, 1820.

123“Nicholas Dumbfish,” Washington (D.C.) National Intelligencer, January 11, 1820.

124The report was signed on October 4, 1819. The Tammany Society had appointed a committee on August 30 to report on the state of the national economy.

125John Woodward, Address of the Society of Tammany to Its Absent Members (New York, 1819), p. 40.

126James Madison to Clarkson Crolius, December 1819, in Washington (D.C.) National Intelligencer, January 22, 1820.

127“Aristides” (William Peter Van Ness), A Letter to the Secretary of the Treasury on the Commerce and the Currency of the United States (New York: C.S. Van Winkle, 1819).

128Also see “A Richmond Correspondent” in Boston New England Palladium, May 28, 1819.

129New York American, March 6, 1819.

130“Seventy-Six,” Cause of and Cure for Hard Times.

131New York Legislature, Assembly Journal, 1820 (February 21, 1820): 466–69.

132New York Legislature, Senate Journal, 1819 (January 6, 1819): 4–14.

133Ibid. (January 26, 1819): 66–70.

134For proposals to eliminate rural banks outside of New York City and Albany, see Albany Argus, June 29, 1819, reprinted in the New York Evening Post, July 2, 1819.

135“Senex,” New York Daily Advertiser, March 24, 1819. On “Senex,” see Murray N. Rothbard, “Contemporary Opinion of the Depression of 1819–21” (New York: Columbia University, Unpublished master’s essay, 1946), pp. 20ff.

136New York Legislature, Senate Journal, 1818 (February 28, 1818): 98.

137Jacob Barker, (Appeal) to the Public (New York, 1819).

138“Plain Sense,” An Examination of Jacob Barker’s Appeal to the Public (New York, 1819).

139“A Merchant,” in New York Daily Advertiser, January 16, 1822.

140Pennsylvania Legislature, Journal of the House, 1818–19 (December 29, 1818, January 30, 1819): 334–39; and 1819–20 (January 4, 1820): 160–62.

141Niles’ Weekly Register 15 (September 19, 1818): 58–59.

142Pennsylvania Legislature, Journal of the House, 1818–19 (January 5, 1819): 138; and (February 1, 1819), p. 345.

143Pennsylvania Legislature, Journal of the Senate, 1819–21 (February 14, 1820): 311–37.

144Ibid., 1819–21 (January 29, 1820): 221–26.

145In Raguet’s terminology, banks going beyond 100 percent reserves were, in this respect, “banks of circulation.” In their capacity of storing money, they were “banks of deposit,” and in their capacity of lending their own money or the borrowed funds of others, they were “banks of discount.” Raguet’s report on bank charters, ibid., 1820–21 (January 15, 1821): 252–68.

146Reprinted in Philadelphia United States Gazette, January 30, 1819.

147“A Pennsylvanian,” in Philadelphia Union, February 11, 1820.

148Niles’ Weekly Register 15 (January 2, 1819): 350.

149Ibid., 16 (April 17, 1819): 132.

150Washington (D.C.) National Intelligencer, April 15, 1819.

151Brigham, “The Period,” p. 292.

152Vermont General Assembly, Journal of the House, 1820 (November 10, 1820): 198ff., also (November 13, 1820), pp. 212ff. For an example of New Hampshire antibank opinion, see “C.S.” in Washington (D.C.) National Intelligencer, November 11, 1819.

153Washington (D.C.) National Intelligencer, November 28, 1820.

154“O.” in Boston New England Palladium, July 4, 1820.

155John Adams to John Taylor, March 12, 1819, in John Adams, Works (Boston: Little, Brown and Co., 1856), vol. 10, p. 375.

156John Quincy Adams to Peter Paul Francis De Grand, November 16, 1818. De Grand proposed that the government issue paper and lend it at 3 percent to the Bank of the United States, which would in turn lend it at 6 percent to private borrowers. John Quincy Adams, Writings, Worthington C. Ford, ed. (New York: The Macmillan Co., 1916), vol. 6, pp. 472–73.

157Esarey, “The First Indiana Banks,” p. 152.

158On May 16, 1819. See Washington (D.C.) National Intelligencer, June 19, 1819.

159Anderson, “Frontier Economic Problems, I,” p. 63.

160Ohio General Assembly, Journal of the House, 1819–20 (December 7, 1819): 9–15.

161Washington (D.C.) National lntelligencer, February 8, 1819.

162Niles’ Weekly Register 17 (October 30, 1819): 139.

163Hammond was the recognized leader of the Ohio bar, leader of the Federalist Party in Ohio, and was later to decline a United States Supreme Court nomination tendered him by John Quincy Adams. See Charles B. Galbreath, History of Ohio (Chicago: American Historical Society, 1925), vol. 2, p. 468.

164Maryland and Kentucky had also levied a tax on the Bank before the depression. Kentucky accepted the decision of the Maryland case.

165The meeting took place on January 30, 1819. See Detroit Gazette, February 5, 1819.

166Secretary of the meeting was J.P. Sheldon, publisher of the Detroit Gazette, and also designated printer of the U.S. Laws for the Michigan Territory. Chairman of the Committee was James Abbott, a dry goods merchant. The committee periodically reported its findings in the Gazette.

167Dain, Every House a Frontier, pp. 102–03.

168Nashville Gazette, September 15, 1819, cited in Parks, “Felix Grundy”; Tennessee General Assembly, Journal of the House of Representatives, 1820 (June 28, 1820): 925.

169Tennessee General Assembly, Journal of the House of Representatives, 1819, pp. 75ff., 132ff., 182ff. Of the 20 votes in favor, 17 came from East Tennessee, while only 3 came from mid-Tennessee. Similarly, of the 14 votes opposed, 12 came from mid-Tennessee. Yet, as seen previously, there was a great deal of anti-expansionist opinion in mid-Tennessee. Also see Parks, “Felix Grundy,” pp. 19–43.

170Parks, Felix Grundy, p. 109.

171Tennessee General Assembly, Journal of the House of Representatives, 1820, pp. 39–40; ibid., 1821 (September 21, 1821): 49.

172Nashville Whig, October 13, 1823, quoted in Charles G. Sellers, Jr., James Polk, Jacksonian, 1795–1843 (Princeton, N.J.: Princeton University Press, 1957), pp. 79ff.

173Jesse Bledsoe, The Speech of Jesse Bledsoe, Esq. . . . Concerning Banks (Lexington, Ky.: Norvell, 1819).

174Kendall, Autobiography, passim.

175Kentucky General Assembly, Journal of the House of Representatives, 1818–19 (December 2, 1818): 9–19.

176Connelley and Coulter, History, p. 605.

177Baylor, John Pope, p. 150.

178Kentucky General Assembly, Journal of the House of Representatives, 1818–19 (December 19, 1818): 87–91.

179Connelley and Coulter, History, p. 605. See also Bray Hammond, Banks and Politics in America (Princeton, N.J.: Princeton University Press, 1957), p. 608.

180The charters were repealed at the end of 1820 to take effect in May 1821. See Stickles, Critical Court Struggle, p. 22.

181Niles’ Weekly Register 20 (June 17, 1820): 296.

182Spencer came from a leading New York family. He was a leading Clintonian, later a Whig and Secretary of War under Tyler, and a rejected Tyler appointee to the United States Supreme Court.

183Annals of Congress, 15th Congress, 2d Session (February 18, 1819), p. 1254; (February 24, 1819), pp. 1404–09; also see M. St. Clair Clarke and D. A. Hall, Legislative and Documentary History of the Bank of the United States (Washington, D.C.: Gales and Seaton 1831), pp. 682ff.

184Representative Kent to House of Representatives, American State Papers: Finance 3, no. 575 (February 2, 1820): 470. Kent was a leading politician and farmer who later became a leading Whig, a senator and three times governor.

185“One of the People” (Cambreleng), An Examination of the New Tariff, pp. 189–202.

186Professor Schur, in a recent article, seriously underweights both the inflationary role of the bank in 1817–18, and the extent to which the reaction against the bank stemmed from hard money views. Leon M. Schur, “The Second Bank of the United States and the Inflation After the War of 1812,” The Journal of Political Economy 68 (April 1960): 118–34.

• 1W.R. Scott found that early business crises in England—in the sixteenth and seventeenth centuries—were attributable to specific acts of government rather than to the complex economic causes that marked modern depressions. W.R. Scott, The Constitutions and Finance of English, Scottish, and Irish Joint-Stock Companies to 1720 (Cambridge, Mass.: Cambridge University Press, 1912), pp. 465–67.
• 2Very little work has been done on the Panic of 1819, either on its events or on contemporary opinion and policies. Samuel Rezneck’s pioneering article dealt largely with Niles’ Register and the protectionist controversy. William E. Folz’s unpublished dissertation was devoted mainly to a description of the events of the pre-Panic period, especially in the West. Thomas H. Greer’s useful article dealing with the Old Northwest overemphasized the traditional sectional and class version of debtors’ relief controversies, in which the West was considered to be almost exclusively in favor of debtors’ relief and the East opposed. Samuel Rezneck, “The Depression of 1819–1822: A Social History,” American Historical Review 49 (October 1933): 28–47; William E. Folz, “The Financial Crisis of 1819–A Study in Post-War Economic Readjustment” (unpublished Ph.D. dissertation, University of Illinois, 1935); Thomas H. Greer, “Economic and Social Effects of the Depression of 1819 in the Old Northwest,” Indiana Magazine of History 49 (September 1948): 227–43.
• 3The banks were largely note-issue institutions. The big-city banks were already using deposits, but there is little or no information about them.
• 4U.S. Congress, American State Papers: Finance 3, no. 559, January 26, 1819 (Washington, D.C.: Gales and Seaton, 1834), p. 398.
• 5U.S. Department of Commerce, Historical Statistics, p. 245.
• 6Clive Day, “The Early Development of the American Cotton Manufacture,” Quarterly Journal of Economics 39 (May 1925): 452.
• 7U.S. Congress, “Digest of Manufactures, Supplement,” American State Papers: Finance 4, no. 691 (Washington, D.C., 1834), p. 397ff. Also George Heberton Evans, Jr., Business Incorporations in the United States, 1800–1943 (New York: National Bureau of Economic Research, 1948), pp. 12–21.
• 8Allan G. Gruchy, Supervision and Control of Virginia State Banks (New York: D. Appleton-Century and Co., 1937), pp. 14–18, 48–56; Davis R. Dewey, State Banking Before the Civil War (Washington, D.C.: U.S. Government Printing Office, 1910).
• 9U.S. Comptroller of the Currency, Annual Report, 1876 (Washington, D.C.: U.S. Government Printing Office, 1876), p. xxxixff.; Albert Gallatin, Considerations on the Currency and Banking Systems of the United States (Philadelphia: Carey and Lea, 1831); and Boston, New England Palladium, July 27, 1819.
• 10Gallatin, Considerations on the Currency, p. 281; William M. Gouge, A Short History of Paper Money and Banking (New York: B. and S. Collins, 1835), pp. 61, 405ff.; U.S. Treasury Department, Reports of the Secretary of the Treasury of the United States (Washington, D.C., Blair and Rives, 1837), vol. 2, pp. 481–525.
• 11See also Dewey, State Banking, pp. 63–68; John Jay Knox, History of Banking in the United States (New York: B. Rhodes and Co., 1900), p. 445; for an account of small denomination paper, see J.T. Scharf and T. Westcott, History of Philadelphia, 1669–1884 (Philadelphia: L.H. Everts and Co., 1884), vol. 1, p. 581; for an account of West Virginia bank expansion, see Charles H. Ambler, Thomas Ritchie, A Study in Virginia Politics (Richmond, Va.: Bell Book and Stationery Co., 1913), pp. 66–67.
• 12Walter Buckingham Smith and Arthur H. Cole, Fluctuations in American Business, 1790–1860 (Cambridge, Mass.: Harvard University Press, 1935), pp. 146, 185; Anne Bezanson et al., Wholesale Prices in Philadelphia, 1784–1861 (Philadelphia: University of Pennsylvania Press, 1936), vol. 2, pp. 352–55, 409; Arthur H. Cole, Wholesale Commodity Prices in the United States, 1700–1861 (Cambridge, Mass.: Harvard University Press, 1938), vol. 1, p. 161.
• 13These are Treasury estimates for fiscal years ending September 30. U.S. Treasury Department, Bureau of Statistics, Monthly Summary of Imports and Exports for the Fiscal Year 1896 (Washington, D.C.: U.S. Government Printing Office, 1896), pp. 622–23. Official data on United States imports are not available before 1821.
• 14Timothy Pitkin, Statistical View of the Commerce of the United States of America, 3rd ed. (New Haven, Conn.: Durrie and Peck, 1835), p. 294; and Worthy P. Sterns, “The Beginning of American Financial Independence,” Journal of Political Economy 6 (1897–98): 191.
• 15Smith and Cole, Fluctuations, p. 147; Bezanson, Wholesale Prices, vol. 1, p. 353.
• 16Ray B. Westerfield, “Early History of American Auctions—A Chapter in Commercial History,” Connecticut Academy of Arts and Sciences, Transactions 13 (May 1920): 164–70; “Observer,” Review of Trade and Commerce of New York, 1815-to-Present (New York, 1820); J. Leander Bishop, A History of American Manufactures, 1608–1866 (Philadelphia: E. Young and Co., 1864), vol. 2, pp. 256ff.; New York Legislature, Assembly Documents, No. 10 (Albany, 1843), pp. 130ff.; Victor S. Clark, History of Manufactures in the United States, 1607–1860 (Washington, D.C.: Carnegie Institute, 1916), vol. 2, pp. 241ff.; Arthur H. Cole, The American Wool Manufacture (Cambridge, Mass.: Harvard University Press, 1926), vol. 1, pp. 156ff., 217; Horace Secrist, “The Anti-Auction Movement and the New York Workingmen’s Party of 1829,” Wisconsin Academy of Sciences, Arts, and Letters, Transactions 17, Part 1 (1914): 166.
• 17Bezanson, Wholesale Prices, vol. 1, p. 355.
• 18For an account of the difficulties of the cotton and woolen industry after the war, see Caroline F. Ware, The Early New England Cotton Manufacture (Boston: Houghton Mifflin Co., 1931), pp. 66, 126ff.; Bishop, A History, pp. 211ff., 236; “Reports of House Committee on Commerce and Manufactures,” U.S. Congress, American State Papers: Finance, vol. 3, pp. 32–35, 82ff., 103, 461; Cole, American Wool Manufacture, pp. 85, 144, 152ff.; Report of House Committee on Domestic Manufactures,” Pennsylvania Legislature, Journal of the House, 1818–20 (January 28, 1820): 413; and J.T. Scharf, History of Delaware (Philadelphia: L.J. Richards and Co., 1888), vol. 2, pp. 304ff.
• 19Day, Early Development, p. 452; Norman S. Buck, Development and Organization of Anglo-American Trade, 1800–1850 (New Haven, Conn.: Yale University Press, 1925), pp. 134–47. See also Evans, Business Incorporations, pp. 12–30; Ware, Early New England, pp. 56ff.
• 20Trade restrictions, however, had already reduced re-exports to $16 million by 1811, the immediate prewar year. Pitkin, Statistical View of Commerce, p. 35; U.S. Treasury, Monthly Summary; and Emory R. Johnson, et al., History of Domestic and Foreign Commerce of the United States (Washington, D.C.: Carnegie Institute, 1915), vol. 2, pp. 31ff. On exports from the principal cities, see Robert G. Albion, The Rise of the New York Port (New York: C. Scribner’s Sons, 1939), p. 390.
• 21Pitkin, Statistical View of Commerce, pp. 95–144.
• 22Cole, Wholesale Commodity Prices, p. 161; Pitkin, Statistical View of Commerce, pp. 108–15.
• 23William M. Gouge, Journal of Banking (Philadelphia: J. Van Court, 1842), pp. 346, 355.
• 24New note issue series by banks reached a heavy peak in 1815 and 1816 in New York and Pennsylvania. D.C. Wismer, Pennsylvania Descriptive List of Obsolete State Bank Notes, 1782–1866 (Fredericksburg, Md.: J.W. Stovell Printing Co., 1933); and idem, New York Descriptive List of Obsolete Paper Money (Fredericksburg, Md.: J.W. Stovell Printing Co., 1931).
• 25U.S. Congress, American State Papers: Finance 4, no. 705 (March 22, 1824): 759.
• 26Dewey, State Banking, pp. 6–21.
• 27For data, see Walter Buckingham Smith, Economic Aspects of the Second Bank of the United States (Cambridge, Mass.: Harvard University Press, 1953), p. 49. Also U.S. Comptroller of the Currency, Annual Report, 1876, p. 261; R.C.H. Catterall, The Second Bank of the United States (Chicago: University of Chicago Press, 1903), p. 501. Other assets of the Bank were $9.5 million in government bonds, $2.7 million due from state banks. Capital totaled $35 million.
• 28Folz, “Financial Crisis,” p. 164; Smith, Economic Aspects, pp. 105, 112; U.S. Congress, American State Papers: Finance 4, no. 705 (March 22, 1824): 523.
• 29A contemporary estimated the number of banks in 1818 at 500. “Philotheus,” Baltimore Federal Republican, July 9, 1819. Also Gouge, Journal, pp. 223–26; New York Legislature, Senate Journal, 1819 (January 26, 1819): 66–70.
• 30N.S.B. Gras, The Massachusetts First National Bank of Boston, 1784–1934 (Cambridge, Mass.: Harvard University Press, 1937), pp. 710–11.
• 31Knox, History of Banking, pp. 485–86.
• 32Gouge, Short History, pp. 166ff.
• 33Purchasers were only required to pay one-fourth of the total within forty days of purchase, and the penalty of forfeiture for failure to complete payment in five years was repeatedly postponed by Congress. U.S. Congress, The Public and General Statutes Passed by the Congress of the United States of America (Boston: Wells and Lilly, 1827), vols. 2 and 3, passim.
• 34See the data compiled from the records of the General Land Office, in Smith and Cole, Fluctuations, p. 185; and in Arthur H. Cole, “Cyclical and Seasonal Variations in the Sale of Public Lands, 1816–60,” Review of Economic Statistics 9 (January 1927): 42ff. Also Thomas P. Abernethy, The Formative Period in Alabama, 1815–28 (Montgomery, Ala.: Brown Printing Co., 1922), p. 50ff.; C.F. Emerick, The Credit System and the Public Domain (Vanderbilt, Tenn.: Southern History Society Publication No. 3, 1898); U.S. Congress, American State Papers: Finance 3, p. 10; and 4, pp. 859–61.
• 35On a building boom in New York City, see the comment by an influential merchant of the day, John Pintard, Letters to His Daughter, vol. 1: 1816–20 (New York: New York Historical Society, 1940), November 16, 1818, p. 154. Also New York Gazette, February 4, 1818. On a rental and property value boom in other states, U.S. Congress, Annals of Congress of the United States, 17th Congress, 1st Session (1821–22), March 12, 1822, pp. 1281–97; Washington (D.C.) National Intelligencer (July 24, 1819); Thomas Cushing, ed., History of Allegheny County, Pennsylvania (Chicago: A. Warner and Co., 1889), p. 547; William E. Connelley and E.M. Coulter, History of Kentucky (Chicago: American Historical Society, 1922), vol. 2, p. 593; Waldo F. Mitchell, “Indiana’s Growth, 1812–20,” Indiana Magazine of History 10 (December 1914): 385; Hattie M. Anderson, “Frontier Economic Problems in Missouri, 1815–28,” Missouri Historical Review 34 (October 1939): 48ff.; Dorothy B. Dorsey, “The Panic of 1819 in Missouri,” Missouri Historical Review 29 (January 1935): 79–80; Report of J.H. Brown at 1st Annual Meeting of Kentucky Bar Association, in William Graham Sumner, History of Banking in the United States (New York: Henry Holt and Co., 1896), p. 89; Charles H. Garnett, State Banks of Issue in Illinois (Urbana University of Illinois, 1898), p. 7; Pennsylvania Legislature, Journal of the Senate, 1819–21 (February 14, 1820): 311–37. On the rise in the price of slaves during the boom, John L. Conger, “South Carolina and Early Tariffs,” Mississippi Valley Historical Review 5 (March 1919): 415–25.
• 36U.S. Department of Commerce, Historical Statistics, pp. 169, 219–20.
• 37Taylor, Transportation Revolution, pp. 23, 336.
• 38Thomas S. Berry, Western Prices Before 1861 (Cambridge, Mass.: Harvard University Press, 1943), pp. 32, 45ff. On the heavy increase in costs of transporting convicts, see Pennsylvania Legislature, Journal of the Senate, 1820–21 (April 3, 1821): 816.
• 39U.S. Congress, House, Annual Report of the Commissioner of Navigation, 1901, 57th Congress, 1st Session, House Document No. 14, p. 585.
• 40Joseph E. Hedges, Commercial Banking and the Stock Market Before 1863 (Baltimore: Johns Hopkins University Press, 1938).
• 41U.S. Treasury, Monthly Summary; Cincinnati, Cincinnati Directory, 1819 (Cincinnati, Ohio, 1819), p. 52.
• 42Pitkin, Statistical View of Commerce, pp. 95–144; Smith, Economic Aspects, p. 280.
• 43Cole, Wholesale Commodity Prices, p. 161; Bezanson, Wholesale Prices, vol. 2, pp. 67–70. Also Smith, Economic Aspects, pp. 72–75; George Rogers Taylor, “Wholesale Commodity Prices at Charleston, South Carolina, 1796–1861,” Journal of Economic and Business History 4 (August 1932): 856–70.
• 44Taylor, Transportation Revolution, pp. 200–202.
• 45The order of magnitude of these earnings was approximately $3 million. See Pitkin, Statistical View of Commerce, p. 166.
• 46On the general attitude of hostility by the public as well as the banks toward attempts to redeem notes in specie, see Crawford, Report; Dewey, State Banking, pp. 73–79ff., 107ff.; Niles’ Weekly Register 13 (August 2, 1817): 357; 9 (February 7, 1817): 32; 14 (June 20, 1818): 281, 285; 14 (May 30, 1818): 225; New York Legislature, “Report on Committee on Currency,” Journal of the Assembly (February 24, 1818): 307–11; Knox, A History of Banking, p. 576. On an agreement by the banks of Philadelphia not to redeem balances against each other without delay, see Harry E. Miller, Banking Theories in the United States Before 1860 (Cambridge, Mass.: Harvard University Press, 1927), p. 215.
• 47Condy Raguet to David Ricardo, April 18, 1821, in David Ricardo, Minor Papers on the Currency Question, 1809–23, Jacob Hollander, ed. (Baltimore: The Johns Hopkins Press, 1932), pp. 199–201.
• 48On the silver premium, see Raguet Report, in Ricardo, Minor Papers, pp. 223–31; Smith, Economic Aspects, pp. 106, 123–24, 283, 286; James Flint, Letters from America, vol. 9, Early Western Travels, 1748–1846, Reuben G. Thwaites, ed. (Cleveland, Ohio: A.H. Clark Co., 1904–07), p. 136.
• 49Smith, Economic Aspects, p. 49.
• 50Ibid., pp. 40, 119, 286. Also see Catterall, Second Bank, p. 503.
• 51Gallatin, Considerations, pp. 45–51; Delaware General Assembly, Journal of the House of Representatives, 1819 (January 28): 104–06; New Hampshire Gazette, August 19, 1817; John J. Walsh, Early Banks in the District of Columbia, 1792–1818 (Washington, D.C.: Catholic University of America Press, 1940), pp. 49, 80, 82, 123ff., 168. Massachusetts banks, in contrast, were able to expand their note issues slightly from 1818–21; Gras, Massachusetts First National Bank, pp. 44–49. Also see Wismer, New York Descriptive List and Pennsylvania Descriptive List, passim.
• 52Folz, “Financial Crisis,” pp. 170–86; and Louis R. Harlan, “Public Career of William Berkeley Lewis,” Tennessee Historical Quarterly 7 (March 1948): 13; Sister M. Grace Madeleine, Monetary and Banking Theories of Jacksonian Democracy (Philadelphia: The Dolphin Press, 1943), p. 14.
• 53On business failures and debt judgments, Niles’ Weekly Register 16 (May 8, June 7, 1819): 179–80, 258–62; Richmond Enquirer, April 23, May 25, June 4, September 3, 1819; Philadelphia Poulson’s American Daily Advertiser, June 19, July 29, August 5, 1822. On the difficulties of domestic manufactures in the depression, Bishop, A History, vol. 2, 248–53, 256–63; Ware, Early New England, pp. 67–68; Cole, Wholesale Prices, vol. 1, pp. 147ff.; and Theodore G. Gronert, “Trade in the Blue-Grass Region, 1810–1820,” Mississippi Valley Historical Review 5 (1918): 313–23. On the failure of lead mines in the crisis, Ruby J. Swartzlow, “The Early History of Lead Mining in Missouri,” Missouri Historical Review 29 (January 1935): 114.
• 54Cole, Wholesale Prices, p. 161; Smith and Cole, Economic Fluctuations, p. 146; and Berry, Western Prices, pp. 71–74, 81–83; Arthur H. Cole, Wholesale Commodity Prices in the United States, 1700–1861 (Cambridge, Mass.: Harvard University Press, 1938), Supplement, pp. 182–91; Thomas S. Berry, “Wholesale Commodity Prices in the Ohio VaIley, 1816–60,” Review of Economic Statistics 17 (August 1935): 92; Taylor, “Wholesale Commodity Prices at Charleston;” Walter Buckingham Smith, “Wholesale Commodity Prices in the United States, 1795–1824,” Review of Economic Statistics 9 (October 1927): 181–83; Swartzlow, “Early History,” p. 201; Frederick W. Moore, “Fluctuations in Agricultural Prices and Wages in the South,” The South in the Building of the Nation (Richmond, Va.: Southern Historical Publishing Society, 1909), vol. 5, pp. 426–34. For the fall in the price of and return on slaves, Francis Corbin to James Madison, October 10, 1819, Massachusetts Historical Society, Proceedings 43 (January 1910): 261; Smith, Economic Aspects, pp. 78–79, 280. On the fall in rental and property values, see Clark, History, pp. 378–86; Richmond Enquirer, August 5, 1820; Connelley and Coulter, History, p. 599; Malcolm R. Eiselen, The Rise of Pennsylvania Protectionism (Philadelphia, 1932), pp. 44ff.
• 55Historical Statistics, pp. 245–48; Pitkin, Statistical View of Commerce, pp. 95–144; and James W. Livingood, The Philadelphia-Baltimore Trade Rivalry, 1780–1860 (Harrisburg: Pennsylvania Historical Commission, 1947), pp. 18–20, 89, 142.
• 56Historical Statistics, p. 248; Pitkin, Statistical View of Commerce, pp. 180–82.
• 57Historical Statistics, pp. 239–40, 245.
• 58Cole, Wholesale Prices, pp. 148, 165; Smith and Cole, Economic Fluctuations, p. 147; Bezanson, Wholesale Prices, p. 353.
• 59Smith and Cole, Economic Fluctuations, p. 185.
• 60One indication of the general decline in business activity was the considerable decline in total letters carried by the U.S. Post Office, a decline the more remarkable for interrupting a period of rapid secular growth, and despite continuing increase in the number of post offices and miles of post roads. Letters carried declined from a peak of 9.6 million in 1819 to 8.5 million in 1821. Wesley E. Rich, The History of the United States Post Office to the Year 1829 (Cambridge, Mass.: Harvard University Press, 1924), p. 183.
• 61Smith, Economic Aspects, p. 124.
• 62On whiskey as a medium of exchange in the crisis, see Alfred E. Lee, History of the City of Columbus (New York: Numsell and Co., 1892), vol. 1, pp. 368–69; on grain as a principal medium, see Greer, “Economic and Social Effects,” p. 232. On barter, see Charles F. Goss, Cincinnati, the Queen City, 1788–1912 (Chicago: S.J. Clarke Co., 1912), vol. 1, opp. 140ff.; Dorsey, “The Panic of 1819,” p. 85; J. Ray Cable, The Bank of the State of Missouri (New York: Columbia University Press, 1923), p. 24; James A. Kehl, Ill-Feeling in the Era of Good Feeling (Pittsburgh: University of Pittsburgh Press, 1956), p. 188.
• 63William Greene, “Thoughts on the Present Situation and Prospect of the Western Country, April 21, 1820,” in “A New Englander’s Impressions of Cincinnati in 1820—Letters by William Greene,” Rosamund R. Wulsin, ed., Bulletin of the Historical and Philosophical Society of Ohio 7 (April 1949): 116–22. Also Annals of Cleveland, 1818–20 (Cleveland: WPA in Ohio, 1938), vol. 1, pp. 398, 479, 539, 543, 569, 590, 629, 649; New York American, August 28, 1819; Harold E. Davis, “Economic Basis of Ohio Politics, 1820–40,” Ohio Archaeological and Historical Quarterly 67 (October 1938): 290, 309; Logan Esarey, History of Indiana (Indianapolis: B.F. Bowen and Co., 1918), vol. 1, pp. 280ff.
• 64See the above sources on manufactures, including Ware, Early New England, pp. 65–72; Bishop, History, vol. 2, p. 253; Cole, American Wool Manufacture, vol. 1, pp. 147ff.; U.S. Congress, American State Papers: Finance, vol. 4, pp. 28ff., 290ff., 357ff.
• 65Massachusetts Department of Labor, “Historical Review of Wages and Prices, 1782–1860,” Sixteenth Annual Report (Boston, 1885), vol. 3, pp. 317–28. Also see the index of wage rates based on these estimates, in Rufus S. Tucker, “Gold and the General Price Level,” Review of Economic Statistics 16 (February 1934): 24; idem, “Real Wages Under Laissez-Faire” Barron’s 13 (October 23, 1933): 7.
• 66William A. Sullivan, The Industrial Worker in Pennsylvania, 1800–1840 (Harrisburg: Pennsylvania Historical and Museum Commission, 1955), pp. 68, 72.
• 67See the report of a Committee of Citizens of Philadelphia, headed by Condy Raguet, in Niles’ Weekly Register 17 (October 23, 1819): 116; also U.S. Congress, American State Papers: Finance 3, p. 641; Matthew Carey, Essays in Political Economy (Philadelphia: Carey and Lea, 1822): 319–20; Niles’ Weekly Register 16 (August 7, 1819): 385 and 21 (September 1, 1821): 1; Flint, Letters, pp. 236, 248; Rezneck, “The Depression,” pp. 29–32; Minutes of the Common Council of the City of New York 9 (December 10, 1819), 663.
• 68A report of the Female Hospitable Society of Philadelphia blamed the increase in pauperism during 1819–20 on unemployment there. Benjamin J. Klebaner, Public Poor Relief in America, 1790–1860 (New York: Columbia University, microfilmed, 1952), pp. 9, 20.
• 69See the message of Governor Joseph Hiester to the Pennsylvania Legislature, December 5, 1821, in Pennsylvania, Pennsylvania Archives, George E. Reed, ed., Fourth series 5 (Harrisburg, 1900): 281.
• 70Smith, Economic Effects, pp. 271–72.
• 71See the aforementioned sources on prices.
• 72On the revival of manufacturing activity, see Niles’ Weekly Register 20 (March 17, 1821): 34–35; Ware, Early New England, p. 88; Philadelphia Union, September 4, 1821; Bishop, History, pp. 270, 294, 297; Gronert, “Trade,” p. 323; Folz, “Financial Crisis,” pp. 234–35. On revival of trade, see Hattie M. Anderson, “Frontier Economic Problems in Missouri, Part II,” Missouri Historical Review 34 (January 1940): 189.
• 73Wesley C. Mitchell, Business Cycles, vol. 1: The Problem and Its Setting (New York: National Bureau of Economic Research, 1927), p. 75.
• 74Ibid., pp. 76–79.
• 75Historical Statistics, p. 63.
• 76Arthur F. Burns and Wesley C. Mitchell, Measuring Business Cycles (New York: National Bureau of Economic Research, 1946), pp. 97n, 408n, 503–05.
• 77George K. Holmes, Cotton Crop of the United States, 1790–1911 (Washington, D.C.: U.S. Department of Agriculture, Bureau of Statistics, 1912), Circular 32, p. 6; idem, Rice Crop of the United States, 1712–1911 (Washington, D.C.: U.S. Department of Agriculture, Bureau of Statistics, 1912), Circular 34, pp. 7–8; Smith, Economic Aspects, pp. 24, 306.
• 78The urban commerce engaged in handling farm products was bolstered by the high physical production.
• 79Although the flow of manufactured imports after the war dealt a heavy blow to household manufactures, particularly in New England and the eastern urban areas, household woolen manufactures in the West and even upstate New York continued to flourish and expand undisturbed. Cole, American Wool Manufacture, vol. 1, pp. 182ff.
• 80Mitchell, Business Cycles, p. 78.
• 81Kathleen Bruce, Virginia Iron Manufacture in the Slave Era (New York: The Century Co., 1931), p. 127.
• 82Burns and Mitchell, Measuring Business Cycles, pp. 78–79.
• 83We shall see, however, that when a problem such as the land debt arose, which Monroe considered within the province of the federal government, the President was quick to take action.
• 84James D. Richardson, ed., A Compilation of the Messages and Papers of the Presidents (New York: Bureau of National Literature, 1897), pp. 608–16.
• 85Ibid., pp. 623–31. Monroe, however, vaguely hinted to Congress that domestic manufactures should in some way be supported.
• 86Ibid., pp. 642–49.
• 87Ibid., pp. 655–63.
• 88Detroit Gazette, December 17, 1819. For other attempts to minimize the depression, see the New York Daily Advertiser, June 14, 1819, June 25, 1819; Philadelphia Union, June 2, 1819; New York Gazette, December 9, 1818; Washington (D.C.) Gazette, reprinted in Raleigh Star, June 25, 1819.
• 89Some of the proponents of laissez-faire were in favor of measures to restrict bank credit expansion. While these measures hardly preserved the status quo, they were not considered programs of government intervention, but rather policies to prevent bank inflation—itself considered an interference with market processes.
• 90[Willard Phillips] “Seybert’s Statistical Annals,” North American Review 9 (September 1819): 207–39.
• 91New York Daily Advertiser, March 6, 1819, August 21, 1819, June 10, 1819, May 20, 1819, June 17, 1819. The only exception the Advertiser was willing to make was sumptuary laws, to enforce frugality and limit extravagance, but it saw no chance of a free people adopting such legislation.
• 92New York Evening Post, June 15, 1819. For other expressions of laissez-faire views, see New York Gazette, December 9, 1818; Richmond Correspondent, in the Boston New England Palladium, May 28, 1819; the charge of Judge Ross to the grand jury, Montgomery County, Pennsylvania, Niles’ Weekly Register 18 (July 1, 1820); Peter Force, National Calendar, 1820 (Washington, 1820), pp. 214ff.; Churchill C. Cambreleng (Signed “One of the People”), An Examination of the New Tariff (New York: Gould and Banks, 1821), pp. 19–21.
• 93Washington (D.C.) National Intelligencer, May 5, 1820.
• 94The Panic of 1819 was America’s first great economic crisis and depression. For the first time in American history, there was a crisis of nationwide scope that could not simply and directly be attributed to specific dislocations and restrictions—such as a famine or wartime blockades. Neither could it be simply attributed to the machinations or blunders of one man or to one upsetting act of government, which could be cured by removing the offending cause. In such a way had the economic dislocations from 1808–15 been blamed on “Mr. Jefferson’s Embargo” or “Mr. Madison’s War.” In short, here was a crisis marked with strong hints of modern depressions; it appeared to come mysteriously from within the economic system itself. Without obvious reasons, processes of production and exchange went awry.
• 95The bulk of the work deals with the remedial proposals themselves, and the speculations, controversies, and policies arising from them. Arguments were especially prevalent over monetary proposals, debtors’ relief—often tied in with monetary schemes—and a protective tariff. At the start of the depression each of these problems was unsettled: the tariff question was not resolved; the monetary system was new and troublesome. But the depression greatly intensified these problems, and added new aspects, and made solutions more pressing.
• 96The monetary system of the country was not highly developed. The banks, outside of New England at least, were confined almost exclusively to the cities. Their methods tended to be lax; government control was negligible; and the fact that most banks, like other corporations of the period, had to gain their status by special legislative charter, invited speculative abuses through pressure on the legislature. The result was a lack of uniformity in dealing with banks within and between states. Until 1811, the existence of the First Bank of the United States had influenced the banks toward uniformity. The currency of the United States was on a bimetallic standard, but at the legal ratio of fifteen-to-one gold was undervalued, and the bulk of the specie in circulation was silver. Silver coins were largely foreign, particularly Spanish, augmented by coins minted in Great Britain, Portugal, and France.
• 97The monetary system of the country was not highly developed. The banks, outside of New England at least, were confined almost exclusively to the cities. Their methods tended to be lax; government control was negligible; and the fact that most banks, like other corporations of the period, had to gain their status by special legislative charter, invited speculative abuses through pressure on the legislature. The result was a lack of uniformity in dealing with banks within and between states. Until 1811, the existence of the First Bank of the United States had influenced the banks toward uniformity. The currency of the United States was on a bimetallic standard, but at the legal ratio of fifteen-to-one gold was undervalued, and the bulk of the specie in circulation was silver. Silver coins were largely foreign, particularly Spanish, augmented by coins minted in Great Britain, Portugal, and France.
• 98The War of 1812 and postwar developments forced the American economy to make many rapid and sudden adjustments. The Anglo-French Wars had long fostered the prosperity of American shipping and foreign trade. As the leading neutral we found our exports in great demand on both sides, and American ships took over trade denied to ships of belligerent nations. With the advent of the Embargo and the Non-Intercourse Acts, and then the war itself, however, our foreign trade was drastically curtailed. Foreign trade had reached a peak of $138 million in imports and $108 million in exports in 1807, and by 1814 had sunk to $13 million imports and $7 million exports. On the other hand, war conditions spurred the growth of domestic manufactures. Cotton and woolen textiles, those bellwethers of the Industrial Revolution, were the leaders in this development. These goods were formerly supplied by Great Britain, but the government now required them for war purposes. Domestic manufactures grew rapidly to fill this demand as well as to meet consumer needs no longer met by imports. Households expanded their production of textiles. Of far more lasting significance was the growth of textile factories, especially in New England, New York, and Pennsylvania. Thus, while only four new cotton factories were established during 1807, forty-three were established during 1814, and fifteen in 1815. Leading merchants, finding their capital idle in foreign trade, turned to invest in the newly profitable field of domestic manufactures. Some of these factories adopted the corporate form, hitherto largely confined to banks, insurance and bridge companies. The total number of new factories incorporated in the leading manufacturing states of Massachusetts, Connecticut, New York, New Jersey, and Maryland, averaged sixty-five a year from 1812 to 1815, compared with eight per annum before the war.
• 99The War of 1812 and postwar developments forced the American economy to make many rapid and sudden adjustments. The Anglo-French Wars had long fostered the prosperity of American shipping and foreign trade. As the leading neutral we found our exports in great demand on both sides, and American ships took over trade denied to ships of belligerent nations. With the advent of the Embargo and the Non-Intercourse Acts, and then the war itself, however, our foreign trade was drastically curtailed. Foreign trade had reached a peak of $138 million in imports and $108 million in exports in 1807, and by 1814 had sunk to $13 million imports and $7 million exports. On the other hand, war conditions spurred the growth of domestic manufactures. Cotton and woolen textiles, those bellwethers of the Industrial Revolution, were the leaders in this development. These goods were formerly supplied by Great Britain, but the government now required them for war purposes. Domestic manufactures grew rapidly to fill this demand as well as to meet consumer needs no longer met by imports. Households expanded their production of textiles. Of far more lasting significance was the growth of textile factories, especially in New England, New York, and Pennsylvania. Thus, while only four new cotton factories were established during 1807, forty-three were established during 1814, and fifteen in 1815. Leading merchants, finding their capital idle in foreign trade, turned to invest in the newly profitable field of domestic manufactures. Some of these factories adopted the corporate form, hitherto largely confined to banks, insurance and bridge companies. The total number of new factories incorporated in the leading manufacturing states of Massachusetts, Connecticut, New York, New Jersey, and Maryland, averaged sixty-five a year from 1812 to 1815, compared with eight per annum before the war.
• 100The War of 1812 and postwar developments forced the American economy to make many rapid and sudden adjustments. The Anglo-French Wars had long fostered the prosperity of American shipping and foreign trade. As the leading neutral we found our exports in great demand on both sides, and American ships took over trade denied to ships of belligerent nations. With the advent of the Embargo and the Non-Intercourse Acts, and then the war itself, however, our foreign trade was drastically curtailed. Foreign trade had reached a peak of $138 million in imports and $108 million in exports in 1807, and by 1814 had sunk to $13 million imports and $7 million exports. On the other hand, war conditions spurred the growth of domestic manufactures. Cotton and woolen textiles, those bellwethers of the Industrial Revolution, were the leaders in this development. These goods were formerly supplied by Great Britain, but the government now required them for war purposes. Domestic manufactures grew rapidly to fill this demand as well as to meet consumer needs no longer met by imports. Households expanded their production of textiles. Of far more lasting significance was the growth of textile factories, especially in New England, New York, and Pennsylvania. Thus, while only four new cotton factories were established during 1807, forty-three were established during 1814, and fifteen in 1815. Leading merchants, finding their capital idle in foreign trade, turned to invest in the newly profitable field of domestic manufactures. Some of these factories adopted the corporate form, hitherto largely confined to banks, insurance and bridge companies. The total number of new factories incorporated in the leading manufacturing states of Massachusetts, Connecticut, New York, New Jersey, and Maryland, averaged sixty-five a year from 1812 to 1815, compared with eight per annum before the war.
• 101The war wrought great changes in the monetary system as well. It brought heavy pressure for federal government borrowing. New England, where the banks were more conservative, was opposed to the war and loaned only negligible amounts to the government, and the federal government came to rely on the mushrooming banks in the other states. These banks were primarily note-issuing institutions, generally run on loose principles. Little specie was paid in as capital, and it was quite common for the stockholders to pay for their bank stock with their own promissory notes, using the stock itself as the only collateral. Usually, the officers and stockholders of the banks were the most favored borrowers in their own institutions. Contributing to the expansion of the note issue was the practice of printing notes in denominations as low as six cents. With the restraint of the Bank of the United States removed, and the needs of government finance heavy, the number of new banks and the quantity of note issue multiplied rapidly. The great expansion of bank notes outside of New England contrasted with the conservative policy of the New England banks, and led to a drain of specie from other states to New England. The relative conservatism of New England banks is revealed by the fact that Massachusetts bank notes outstanding increased but slowly—from $2.4 million to $2.7 million from 1811 to 1815. Furthermore, specie in the bank vaults increased from $1.5 million to $3.5 million in the same period.
• 102The war wrought great changes in the monetary system as well. It brought heavy pressure for federal government borrowing. New England, where the banks were more conservative, was opposed to the war and loaned only negligible amounts to the government, and the federal government came to rely on the mushrooming banks in the other states. These banks were primarily note-issuing institutions, generally run on loose principles. Little specie was paid in as capital, and it was quite common for the stockholders to pay for their bank stock with their own promissory notes, using the stock itself as the only collateral. Usually, the officers and stockholders of the banks were the most favored borrowers in their own institutions. Contributing to the expansion of the note issue was the practice of printing notes in denominations as low as six cents. With the restraint of the Bank of the United States removed, and the needs of government finance heavy, the number of new banks and the quantity of note issue multiplied rapidly. The great expansion of bank notes outside of New England contrasted with the conservative policy of the New England banks, and led to a drain of specie from other states to New England. The relative conservatism of New England banks is revealed by the fact that Massachusetts bank notes outstanding increased but slowly—from $2.4 million to $2.7 million from 1811 to 1815. Furthermore, specie in the bank vaults increased from $1.5 million to $3.5 million in the same period.
• 103There was no uniform currency except specie that could be used in all areas of the country. Furthermore, the government, borrowing Middle Atlantic, Southern, and Western bank notes, had to make heavy expenditures in the New England area for imported supplies and for newly burgeoning textile goods manufactured in that region. The resulting specie drain and the continuing bank note expansion led inevitably to a suspension of specie payments outside the New England area in August 1814. The government agreed to this suspension, and the banks continued in operation—the exchange rate of each bank’s notes varying widely. The notes of the suspended banks depreciated at varying rates with respect to the New England bank notes and to specie. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues. The number of banks in the United States rose from 88 in 1811 to 208 in 1815, while bank notes outstanding rose from $2.3 million to $4.6 million in the same period. Expansion was particularly large in the Middle Atlantic states, notably Pennsylvania. The number of banks in the Middle Atlantic states increased from 25 to 111 in this period, while banks in the southern and western states increased from 16 to 34. Pennsylvania incorporated 41 banks in the month of March, 1814.
• 104There was no uniform currency except specie that could be used in all areas of the country. Furthermore, the government, borrowing Middle Atlantic, Southern, and Western bank notes, had to make heavy expenditures in the New England area for imported supplies and for newly burgeoning textile goods manufactured in that region. The resulting specie drain and the continuing bank note expansion led inevitably to a suspension of specie payments outside the New England area in August 1814. The government agreed to this suspension, and the banks continued in operation—the exchange rate of each bank’s notes varying widely. The notes of the suspended banks depreciated at varying rates with respect to the New England bank notes and to specie. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues. The number of banks in the United States rose from 88 in 1811 to 208 in 1815, while bank notes outstanding rose from $2.3 million to $4.6 million in the same period. Expansion was particularly large in the Middle Atlantic states, notably Pennsylvania. The number of banks in the Middle Atlantic states increased from 25 to 111 in this period, while banks in the southern and western states increased from 16 to 34. Pennsylvania incorporated 41 banks in the month of March, 1814.
• 105The war also saw a great rise in prices. Prices of domestic goods rose under the impact of the rapid expansion of the money supply; prices of imported goods rose further as a result of the blocking of foreign trade. Domestic commodity prices rose by about 20–30 percent; cotton, the leading export staple, doubled in price. Imported commodity prices rose by about 70 percent.
• 106The first war of the new nation, therefore, wrought many unsettling changes in the American economy. Trade was blocked from its former channels, the monetary system became disordered, expansion of money and a shortage of imported goods drove prices upward, and domestic manufactures—particularly textiles—developed under the spur of government demand and the closing of foreign supply sources. The advent of peace brought its own set of problems. After the wartime shortages, the scramble for foreign trade was pursued in earnest. Americans were eager to buy foreign goods, particularly British textiles, and the British exporters were anxious to unload their accumulated stocks. Total imports rose from $5.3 million in the last prewar year to $113 million in 1815, and to $147 million in 1816. British exports to the United States alone totaled $59 million in 1815, and $43 million in 1816. The renewal of the supply of imported goods drastically lowered the prices of imports in the United States and spurred American demand. Imported commodity prices at Philadelphia, for example, fell in one month (March, 1815) from an index of 231 to 178. Import prices continued to sag afterwards, reaching 125 by early 1817.
• 107The first war of the new nation, therefore, wrought many unsettling changes in the American economy. Trade was blocked from its former channels, the monetary system became disordered, expansion of money and a shortage of imported goods drove prices upward, and domestic manufactures—particularly textiles—developed under the spur of government demand and the closing of foreign supply sources. The advent of peace brought its own set of problems. After the wartime shortages, the scramble for foreign trade was pursued in earnest. Americans were eager to buy foreign goods, particularly British textiles, and the British exporters were anxious to unload their accumulated stocks. Total imports rose from $5.3 million in the last prewar year to $113 million in 1815, and to $147 million in 1816. British exports to the United States alone totaled $59 million in 1815, and $43 million in 1816. The renewal of the supply of imported goods drastically lowered the prices of imports in the United States and spurred American demand. Imported commodity prices at Philadelphia, for example, fell in one month (March, 1815) from an index of 231 to 178. Import prices continued to sag afterwards, reaching 125 by early 1817.
• 108The first war of the new nation, therefore, wrought many unsettling changes in the American economy. Trade was blocked from its former channels, the monetary system became disordered, expansion of money and a shortage of imported goods drove prices upward, and domestic manufactures—particularly textiles—developed under the spur of government demand and the closing of foreign supply sources. The advent of peace brought its own set of problems. After the wartime shortages, the scramble for foreign trade was pursued in earnest. Americans were eager to buy foreign goods, particularly British textiles, and the British exporters were anxious to unload their accumulated stocks. Total imports rose from $5.3 million in the last prewar year to $113 million in 1815, and to $147 million in 1816. British exports to the United States alone totaled $59 million in 1815, and $43 million in 1816. The renewal of the supply of imported goods drastically lowered the prices of imports in the United States and spurred American demand. Imported commodity prices at Philadelphia, for example, fell in one month (March, 1815) from an index of 231 to 178. Import prices continued to sag afterwards, reaching 125 by early 1817.
• 109The ability and eagerness to import was increased by the continued inflation and credit expansion of the banks, which still were not obliged to redeem in specie. Furthermore, the federal government aided imports by allowing from several months to more than a year for payment of import duties. British and other foreign exporters were willing to grant short-term credits on a large scale to American importers, and these credits played a major role in meeting the large balance of trade deficit in the postwar years. A further spur to imports, again particularly in British textiles, was the emergence of a system of selling these goods at auction sales instead of through regular import channels. British manufacturers found that auction sales through agents yielded quicker returns; the lower prices were compensated by the lower costs of operation. The auction system flourished, particularly in New York City. Total auction sales in the United States during 1818 were $30 million. In New York City they totaled $14 million, in contrast to $5 million before the war. Half of these sales consisted of European dry goods, in contrast to a sale of $1 million of American-made dry goods.
• 110The influx of imports spelled trouble for war-grown manufactures, especially textiles, which suddenly had to face the onrush of foreign competition. The manufacturers did not share in the general postwar prosperity. Bezanson’s index of prices of industrial commodities at Philadelphia (including such products as dyes, chemicals, metals, textiles, sugar, soap, glass), which had increased from 141 to 214 during the war period, fell abruptly to 177 in March, 1815, and continued to fall, reaching 127 in March, 1817. This drop indicates the difficulties confronting the fledgling manufacturers. The households which had increased textile manufacturing during the war could easily suspend their work as imports resumed, but the new factories had invested capital at stake. A few of the up-to-date factories, such as the famous cotton textile firm of Waltham, Massachusetts—a pioneer in American mass production, using the new power loom to make plain white sheeting for lower income customers—could easily withstand the competition, but most factories were hard-pressed. The decline continued for several years; new factories incorporated in five leading manufacturing states averaged nine per annum from 1817–19, in contrast to sixty-four per annum in the war years.
• 111The influx of imports spelled trouble for war-grown manufactures, especially textiles, which suddenly had to face the onrush of foreign competition. The manufacturers did not share in the general postwar prosperity. Bezanson’s index of prices of industrial commodities at Philadelphia (including such products as dyes, chemicals, metals, textiles, sugar, soap, glass), which had increased from 141 to 214 during the war period, fell abruptly to 177 in March, 1815, and continued to fall, reaching 127 in March, 1817. This drop indicates the difficulties confronting the fledgling manufacturers. The households which had increased textile manufacturing during the war could easily suspend their work as imports resumed, but the new factories had invested capital at stake. A few of the up-to-date factories, such as the famous cotton textile firm of Waltham, Massachusetts—a pioneer in American mass production, using the new power loom to make plain white sheeting for lower income customers—could easily withstand the competition, but most factories were hard-pressed. The decline continued for several years; new factories incorporated in five leading manufacturing states averaged nine per annum from 1817–19, in contrast to sixty-four per annum in the war years.
• 112The influx of imports spelled trouble for war-grown manufactures, especially textiles, which suddenly had to face the onrush of foreign competition. The manufacturers did not share in the general postwar prosperity. Bezanson’s index of prices of industrial commodities at Philadelphia (including such products as dyes, chemicals, metals, textiles, sugar, soap, glass), which had increased from 141 to 214 during the war period, fell abruptly to 177 in March, 1815, and continued to fall, reaching 127 in March, 1817. This drop indicates the difficulties confronting the fledgling manufacturers. The households which had increased textile manufacturing during the war could easily suspend their work as imports resumed, but the new factories had invested capital at stake. A few of the up-to-date factories, such as the famous cotton textile firm of Waltham, Massachusetts—a pioneer in American mass production, using the new power loom to make plain white sheeting for lower income customers—could easily withstand the competition, but most factories were hard-pressed. The decline continued for several years; new factories incorporated in five leading manufacturing states averaged nine per annum from 1817–19, in contrast to sixty-four per annum in the war years.
• 113American exports continued to expand greatly, however, although by far less than imports. Europe’s hunger for agricultural staples was stimulated by poor postwar crops abroad, and the prices and values of American staples exported, notably cotton and tobacco, increased greatly. Such leading customers as Britain and France led the surge in European demand. In spite of this, exports never reached the peak prewar totals. Re-exports of foreign goods fared badly, never attaining more than one-third of their prewar level, when neutral ships of the United States had a virtual monopoly of the European carrying trade. Domestic exports totaled $46 million in the fiscal year 1815, and $65 million in 1816, compared to a prewar peak of $49 million. Re-exports, on the other hand, totaled $7 million in 1816, and $17 million the next year, compared to the prewar peak of $60 million. The net balance of foreign trade, in sum, was a deficit of $60 million for the fiscal year of 1815, and of $65 million for the fiscal year 1816. Agricultural produce accounted for $14 million of the $19 million increase in domestic exports from 1815 to 1816. Agricultural produce exported rose from $38 million in the fiscal year 1815 to $52 million in 1816. Cotton furnished about half of the agricultural exports, and tobacco, wheat, and flour formed the bulk of the remainder. Of the exports in 1815, cotton was $17.5 million, tobacco was $8 million, and wheat and flour exports totaled $7 million. In 1816, cotton increased to $24 million, and tobacco to $13 million.
• 114American exports continued to expand greatly, however, although by far less than imports. Europe’s hunger for agricultural staples was stimulated by poor postwar crops abroad, and the prices and values of American staples exported, notably cotton and tobacco, increased greatly. Such leading customers as Britain and France led the surge in European demand. In spite of this, exports never reached the peak prewar totals. Re-exports of foreign goods fared badly, never attaining more than one-third of their prewar level, when neutral ships of the United States had a virtual monopoly of the European carrying trade. Domestic exports totaled $46 million in the fiscal year 1815, and $65 million in 1816, compared to a prewar peak of $49 million. Re-exports, on the other hand, totaled $7 million in 1816, and $17 million the next year, compared to the prewar peak of $60 million. The net balance of foreign trade, in sum, was a deficit of $60 million for the fiscal year of 1815, and of $65 million for the fiscal year 1816. Agricultural produce accounted for $14 million of the $19 million increase in domestic exports from 1815 to 1816. Agricultural produce exported rose from $38 million in the fiscal year 1815 to $52 million in 1816. Cotton furnished about half of the agricultural exports, and tobacco, wheat, and flour formed the bulk of the remainder. Of the exports in 1815, cotton was $17.5 million, tobacco was $8 million, and wheat and flour exports totaled $7 million. In 1816, cotton increased to $24 million, and tobacco to $13 million.
• 115Prices of American exports increased as a result of increased European demand and monetary expansion at home. The boom in export values was largely a price and not a physical production phenomenon. Cole’s index of export prices at Charleston rose from 93 in March 1815, to 138 in March 1817, and cotton prices rose even more in the same period. The physical quantity of cotton produced and exported, on the other hand, increased slowly in these years.
• 116The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 117The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 118The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 119The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 120The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 121The boom therefore continued in 1818, with the Bank of the United States acting as an expansionary, rather than as a limiting, force. The expansionist attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from public land sales. The expansion of its note issue encouraged the state banks throughout the country, especially outside New England, to multiply and continue their credit expansion. The number of banks had increased from 246 in 1816 to 392 in 1818. Kentucky alone chartered 40 new banks in the 1817–18 session. Bank expansion was spurred by the decision of the Bank of the United States and the Treasury to treat the notes of nominally resuming banks as actually equivalent to specie. The Bank thereby accumulated balances and notes against the private banks without presenting them for redemption. Many of these notes were original Treasury balances which had been deposited with the Bank but not claimed from the state banks. In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy. Indeed, they were forced to contract, as the New England branches of the Bank were continually forced to payout specie on the expanded note issue of the western and southern branches, since by prevailing Bank rule, all branches were liable for the notes of all other branches. As a result, the notes of the Massachusetts banks declined from a total of $1 million in June, 1815 to $850 thousand by June, 1818.
• 122The boom therefore continued in 1818, with the Bank of the United States acting as an expansionary, rather than as a limiting, force. The expansionist attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from public land sales. The expansion of its note issue encouraged the state banks throughout the country, especially outside New England, to multiply and continue their credit expansion. The number of banks had increased from 246 in 1816 to 392 in 1818. Kentucky alone chartered 40 new banks in the 1817–18 session. Bank expansion was spurred by the decision of the Bank of the United States and the Treasury to treat the notes of nominally resuming banks as actually equivalent to specie. The Bank thereby accumulated balances and notes against the private banks without presenting them for redemption. Many of these notes were original Treasury balances which had been deposited with the Bank but not claimed from the state banks. In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy. Indeed, they were forced to contract, as the New England branches of the Bank were continually forced to payout specie on the expanded note issue of the western and southern branches, since by prevailing Bank rule, all branches were liable for the notes of all other branches. As a result, the notes of the Massachusetts banks declined from a total of $1 million in June, 1815 to $850 thousand by June, 1818.
• 123The boom therefore continued in 1818, with the Bank of the United States acting as an expansionary, rather than as a limiting, force. The expansionist attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from public land sales. The expansion of its note issue encouraged the state banks throughout the country, especially outside New England, to multiply and continue their credit expansion. The number of banks had increased from 246 in 1816 to 392 in 1818. Kentucky alone chartered 40 new banks in the 1817–18 session. Bank expansion was spurred by the decision of the Bank of the United States and the Treasury to treat the notes of nominally resuming banks as actually equivalent to specie. The Bank thereby accumulated balances and notes against the private banks without presenting them for redemption. Many of these notes were original Treasury balances which had been deposited with the Bank but not claimed from the state banks. In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy. Indeed, they were forced to contract, as the New England branches of the Bank were continually forced to payout specie on the expanded note issue of the western and southern branches, since by prevailing Bank rule, all branches were liable for the notes of all other branches. As a result, the notes of the Massachusetts banks declined from a total of $1 million in June, 1815 to $850 thousand by June, 1818.
• 124A generally uniform currency prevailed throughout the country, most bank notes circulating at par. There were exceptions, however; during 1818, for example, notes of some banks in Pennsylvania were depreciated by as much as 30 percent, and in Virginia, Kentucky, and Tennessee by as much as 12 percent.
• 125A generally uniform currency prevailed throughout the country, most bank notes circulating at par. There were exceptions, however; during 1818, for example, notes of some banks in Pennsylvania were depreciated by as much as 30 percent, and in Virginia, Kentucky, and Tennessee by as much as 12 percent.
• 126Investment in real estate, turnpikes, and farm improvement projects spurted, and prices in these fields rose. Furthermore, the federal government facilitated large-scale speculation in public lands by opening up for sale large tracts in the Southwest and Northwest, and granting liberal credit terms to purchasers. Public land sales, which had averaged $2 million to $4 million per annum in 1815 and 1816, rose to a peak of $13.6 million in 1818.
• 127Investment in real estate, turnpikes, and farm improvement projects spurted, and prices in these fields rose. Furthermore, the federal government facilitated large-scale speculation in public lands by opening up for sale large tracts in the Southwest and Northwest, and granting liberal credit terms to purchasers. Public land sales, which had averaged $2 million to $4 million per annum in 1815 and 1816, rose to a peak of $13.6 million in 1818.
• 128Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 129Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 130Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 131Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 132Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 133It does not seem accidental that the boom period saw the establishment of the first formal indoor stock exchange in the country: the New York Stock Exchange opened in March, 1817. Traders had been buying and selling stocks on the curbs in Wall Street since the eighteenth century, but now they found it necessary to form a definite association and rent indoor quarters. The period also marked the beginning of investment banking: commercial banks and individual bankers bought blocks of stock and sold them in small lots on the market or sold the stocks as agents of the issuer. Prominent in this new business were former merchants in foreign trade who had accumulated capital, such as Alexander Brown and Sons, and persons with fortunes amassed elsewhere, such as Astor and Son.
• 134As a result of the monetary and credit expansion, imports continued at a high rate, exceeding the rising exports, and financed by specie outflow and by credits from foreign merchants. After the rush for imports in 1815 and 1816, import values, though remaining at a relatively high level, declined in 1817. This temporary decline from peak levels was spurred by the uncertainties surrounding the return of the banking system to specie payment in 1817, and the consequent relative slackening in monetary expansion during that period. However, imports increased sharply again in 1818 to $122 million. Imports of foreign goods into Cincinnati—the major western depot—doubled in 1817–18 over the 1815–16 totals. In contrast, prices of imported goods, determined largely by conditions outside America, remained almost constant during these years.
• 135Exports, helped by European prosperity and poor crops abroad, continued to rise in price and value. They rose to $88 million in 1817 and reached a peak of $93 million in 1818. Exports of domestic products also rose to a peak of $74 million in that year. Even reexports reached a postwar peak in 1818, although the increase over 1816 was negligible. Agricultural exports rose to $57 million in 1817 and to a peak of $63 million in 1818, advancing at a faster rate than domestic exports as a whole. Agricultural exports rose by $5 million in 1817 and $5.4 million in 1818, while aggregate domestic exports rose by $3.5 million and $5.6 million respectively. Cotton exports also reached a peak in the latter year. Prices of export staples rose even more rapidly during this period. Cole’s index of export staple prices at Charleston rose from 138 in March, 1817 to 169 in August, 1818. A similar rise occurred in Bezanson’s cotton index.
• 136Exports, helped by European prosperity and poor crops abroad, continued to rise in price and value. They rose to $88 million in 1817 and reached a peak of $93 million in 1818. Exports of domestic products also rose to a peak of $74 million in that year. Even reexports reached a postwar peak in 1818, although the increase over 1816 was negligible. Agricultural exports rose to $57 million in 1817 and to a peak of $63 million in 1818, advancing at a faster rate than domestic exports as a whole. Agricultural exports rose by $5 million in 1817 and $5.4 million in 1818, while aggregate domestic exports rose by $3.5 million and $5.6 million respectively. Cotton exports also reached a peak in the latter year. Prices of export staples rose even more rapidly during this period. Cole’s index of export staple prices at Charleston rose from 138 in March, 1817 to 169 in August, 1818. A similar rise occurred in Bezanson’s cotton index.
• 137The net result in the balance of trade was a sharp drop in the trade deficit to $11.6 million in 1817, and a later rise to $28.5 million in 1818. The large deficits of the postwar years are partly overstated, for some were offset by earnings of American shipping, which carried almost all American foreign trade—the earnings of which do not appear in the trade balance.
• 138The net result in the balance of trade was a sharp drop in the trade deficit to $11.6 million in 1817, and a later rise to $28.5 million in 1818. The large deficits of the postwar years are partly overstated, for some were offset by earnings of American shipping, which carried almost all American foreign trade—the earnings of which do not appear in the trade balance.
• 139Troubles and strains, however, began to pile up as the boom continued. The resumption of specie payments by the banks was increasingly more nominal than real. Obstacles and intimidation were the lot of those who attempted to press the banks for payment in specie. As the Philadelphia economist, merchant, and State Senator Condy Raguet wrote to Ricardo:
• 140You state in your letter that you find it difficult to comprehend, why persons who had a right to demand coin from the Banks in payment of their notes, so long forbore to exercise it. This no doubt appears paradoxical to one who resides in a country where an act of parliament was necessary to protect a bank, but the difficulty is easily solved. The whole of our population are either stockholders of banks or in debt to them. It is not the interest of the first to press the banks and the rest are afraid. This is the whole secret. An independent man, who was neither a stockholder or debtor, who would have ventured to compel the banks to do justice, would have been persecuted as an enemy of society.
• 141The consequent loss of confidence in the banks was demonstrated by the emergence of a premium for specie on the market. The discount on bank notes made it more difficult for the banks maintaining specie payment to retain specie in their vaults, since people could redeem their notes for specie, and sell it for bank notes at a discount. Specie came to be at a premium in terms of Bank of United States notes, even though the Bank was required to pay in specie. This reflected a lack of confidence in the Bank’s ability to continue specie payments. A premium on Spanish silver dollars—the major coin circulating in the United States—appeared in March, 1818, and reached 4 percent by June and 6 percent by November. The specie drain from the Bank vaults increased, adding to the heavy external drain for payment of imports. It became evident that the Bank could not long continue expanding its notes and paying out specie at such a rapid rate. Importations of specie from abroad by the Bank, totaling over $7 million and purchased at a heavy price, proved only a temporary expedient. The problem was aggravated by the pressure resulting from rapid repayment of the Federal debt. The autumn of 1818 and early 1819 were the scheduled dates for the repayment of the “Louisiana debt,” which had financed the Louisiana Purchase. Most of this debt—amounting to over $4 million—was owed abroad, and it had to be repaid in specie. The responsibility for meeting the payments fell on the Bank of the United States, the repository for the Treasury’s deposits.
• 142Faced with these threatening circumstances, the Bank of the United States was forced to call a halt to its expansion and launch a painful process of contraction. Beginning in the summer of 1818, the Bank precipitated the Panic of 1819 by a series of deflationary moves. The branches of the Bank were ordered to call on the state banks to redeem heavy balances and notes held by the Bank. The requirement that each branch redeem the notes of every other branch was rescinded, thus ending the liability of the conservative eastern branches to redeem the notes of expansionist branches. The Boston branch began this move in March, and it was made general for all the Bank’s offices by the end of August. The contractionist policy, begun hesitantly under the presidency of William Jones and continued more firmly under the direction of his successor Langdon Cheves, sharply limited and contracted the loans and note issues of the branches. As a result, total demand liabilities of the Bank, including notes, private and public deposits, declined precipitately from $22 million in the fall of 1818 to $12 million in January, 1819, and to $10 million by January, 1820. Of this amount, notes outstanding of the Bank fell from a peak of $10 million in early 1818, to $8.5 million in the fall of 1818, less than $5 million by the summer of 1819, and $3.6 million by January, 1820. Particularly striking was the decline in the Bank’s public deposits, consisting largely of bank debts accumulated from public land sales. They declined from $9 million in the autumn of 1818 to less than $3 million in January, 1819.
• 143Another result of contraction was a large rise in the Bank’s specie reserve, which had been about $2.5 million during 1818 and early 1819. As loans were recalled, and the specie drain reversed, specie flowed into the Bank and reached $3.4 million in January, 1820. Specie reserves spurted to $8 million in the spring of 1821, at a time when total demand liabilities of the Bank were less than $12 million.
• 144The contractionist policy forced the state banks, in debt to the Bank, to contract their loans and notes outstanding at a rapid pace. Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England. In many cases, banks attempted to continue in operation while refusing specie payment, but their notes depreciated greatly and no longer circulated outside the vicinity of issue. The notes of most of the inland banks depreciated and fluctuated in relation to each other. New England, in contrast, was the only area little touched by bank failures or runs; the banks outside of Rhode Island remained solvent. The entire hastily built private credit structure was greatly shaken by the contraction and wave of defaults. The financial panic led, as did later panics, to a great scramble for a cash position, and an eagerness to sell stocks of goods at even sacrifice rates.
• 145The contractionist policy forced the state banks, in debt to the Bank, to contract their loans and notes outstanding at a rapid pace. Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England. In many cases, banks attempted to continue in operation while refusing specie payment, but their notes depreciated greatly and no longer circulated outside the vicinity of issue. The notes of most of the inland banks depreciated and fluctuated in relation to each other. New England, in contrast, was the only area little touched by bank failures or runs; the banks outside of Rhode Island remained solvent. The entire hastily built private credit structure was greatly shaken by the contraction and wave of defaults. The financial panic led, as did later panics, to a great scramble for a cash position, and an eagerness to sell stocks of goods at even sacrifice rates.
• 146The contractionist policy forced the state banks, in debt to the Bank, to contract their loans and notes outstanding at a rapid pace. Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England. In many cases, banks attempted to continue in operation while refusing specie payment, but their notes depreciated greatly and no longer circulated outside the vicinity of issue. The notes of most of the inland banks depreciated and fluctuated in relation to each other. New England, in contrast, was the only area little touched by bank failures or runs; the banks outside of Rhode Island remained solvent. The entire hastily built private credit structure was greatly shaken by the contraction and wave of defaults. The financial panic led, as did later panics, to a great scramble for a cash position, and an eagerness to sell stocks of goods at even sacrifice rates.
• 147The severe contraction of the money supply, added to an increased demand for liquidity, led to a rapid and very heavy drop in prices. Although detailed price information is available only for wholesale commodities, there is evidence that prices fell in many other fields, such as real estate values and rents. Most important for the American economy were the prices of the great export staples, and their fall was remarkably precipitate. The index of export staples fell from 169 in August 1818, and 158 in November, 1818, to 77 in June, 1819. A similar movement occurred in the price of cotton and in the Smith and Cole index of domestic commodity prices. Evidence of falling prices can be seen in freight rates and in the prices of slaves.
• 148The fall in export prices was aggravated by a fall in European demand for agricultural imports, occasioned by the abundant European crops after 1817 and the crisis and business contraction in Britain during the same period. Values of American exports declined sharply as well. Total exports fell from $93 million in 1818 to $70 million in 1819 and 1820. Re-exports did not contract, and the brunt was taken by domestic exports, which fell from $74 million to $51 million. Of this drop, $20 million was accounted for by agricultural exports ($10 million by cotton and $7 million by wheat and flour). It was a pure price decline, since the physical volume of exports continued to increase steadily during this period.
• 149Imports fell even more in value than did exports, reflecting the decline in American incomes. Total imports fell drastically from $122 million in 1818 to $87 million in 1819 and $74.5 million in 1820, thus practically ending the specie drain. Imports from Great Britain fell from $42 million in 1818 to $14 million in 1820, and cotton and woolen imports from Britain fell from over $14 million each in 1818 to about $5 million.
• 150During 1821, total exports and total imports are listed as almost identical, $54.6 million for the former and $54.5 million for the latter. Both were absolute low points, not only for the period of boom and depression but for America since 1815. Import prices also fell with the advent of economic contraction abroad. They fell only slightly, however, and were a negligible factor in the reduction of import values, as compared to the decrease in money income at home. The index of import prices at Philadelphia fell from 126 to 112 from November, 1818 to July, 1819.
• 151During 1821, total exports and total imports are listed as almost identical, $54.6 million for the former and $54.5 million for the latter. Both were absolute low points, not only for the period of boom and depression but for America since 1815. Import prices also fell with the advent of economic contraction abroad. They fell only slightly, however, and were a negligible factor in the reduction of import values, as compared to the decrease in money income at home. The index of import prices at Philadelphia fell from 126 to 112 from November, 1818 to July, 1819.
• 152The credit contraction also caused public land sales to drop sharply, falling from $13.6 million in 1818, to $1.7 million in 1820, and to $1.3 million in 1821. Added to a quickened general desire for a cash position, it also led to high interest rates and common complaint about the scarcity of loanable funds.
• 153Economic distress was suffered by all groups in the community. The great fall in prices heavily increased the burden of fixed money debts, and provided a great impetus toward debtor insolvency. The distress of the farmers, occasioned by the fall in agricultural and real estate prices, was aggravated by the mass of private and bank debts that they had contracted during the boom period. Borrowing for long-term improvements, farmers had been served by the new and greatly expanded banks of the South and West, as well as by the western branches of the Bank of the United States. Bank stockholders who had borrowed on the basis of unpaid stock found themselves forced to meet their debts. Speculators and others who had bought public lands during the boom were now confronted with heavy debt burdens. Merchants suffered from the decline in prices and demand for their produce and from heavy debts. Their debts to the British as well as to domestic creditors were often canceled by the ruthless process of bankruptcy. Niles judged that no less than $100 million of mercantile debts to Europe were eliminated by bankruptcy during the depression. So low were prices and so scarce was the monetary medium in the frontier areas that there was a considerable return to barter conditions among farmers and other local inhabitants. Various areas returned to barter or the use of such goods as grain and whiskey as media of exchange.
• 154Economic distress was suffered by all groups in the community. The great fall in prices heavily increased the burden of fixed money debts, and provided a great impetus toward debtor insolvency. The distress of the farmers, occasioned by the fall in agricultural and real estate prices, was aggravated by the mass of private and bank debts that they had contracted during the boom period. Borrowing for long-term improvements, farmers had been served by the new and greatly expanded banks of the South and West, as well as by the western branches of the Bank of the United States. Bank stockholders who had borrowed on the basis of unpaid stock found themselves forced to meet their debts. Speculators and others who had bought public lands during the boom were now confronted with heavy debt burdens. Merchants suffered from the decline in prices and demand for their produce and from heavy debts. Their debts to the British as well as to domestic creditors were often canceled by the ruthless process of bankruptcy. Niles judged that no less than $100 million of mercantile debts to Europe were eliminated by bankruptcy during the depression. So low were prices and so scarce was the monetary medium in the frontier areas that there was a considerable return to barter conditions among farmers and other local inhabitants. Various areas returned to barter or the use of such goods as grain and whiskey as media of exchange.
• 155Economic distress was suffered by all groups in the community. The great fall in prices heavily increased the burden of fixed money debts, and provided a great impetus toward debtor insolvency. The distress of the farmers, occasioned by the fall in agricultural and real estate prices, was aggravated by the mass of private and bank debts that they had contracted during the boom period. Borrowing for long-term improvements, farmers had been served by the new and greatly expanded banks of the South and West, as well as by the western branches of the Bank of the United States. Bank stockholders who had borrowed on the basis of unpaid stock found themselves forced to meet their debts. Speculators and others who had bought public lands during the boom were now confronted with heavy debt burdens. Merchants suffered from the decline in prices and demand for their produce and from heavy debts. Their debts to the British as well as to domestic creditors were often canceled by the ruthless process of bankruptcy. Niles judged that no less than $100 million of mercantile debts to Europe were eliminated by bankruptcy during the depression. So low were prices and so scarce was the monetary medium in the frontier areas that there was a considerable return to barter conditions among farmers and other local inhabitants. Various areas returned to barter or the use of such goods as grain and whiskey as media of exchange.
• 156One thing seems to be universally conceded, that the greater part of our mercantile citizens are in a state of bankruptcy—that those of them who have the largest possessions of real and personal estate . . . find it almost impossible to raise sufficient funds to supply themselves with the necessaries of life—that the citizens of every class are uniformly delinquent in discharging even the most trifling of debts.
• 157Manufacturers suffered from the general decline in prices as well as from the contraction in credit, and the panic served to intensify their generally depressed condition since the end of the war. However, the progressive factory at Waltham was able to withstand the buffetings of the depression, to continue profitable operations, and even to expand throughout the depression period.
• 158Evidence is very scanty on the behavior of wage rates during this period. In Massachusetts, the wages of agricultural workers fluctuated sharply with the boom and contraction, averaging sixty cents per day in 1811, $1.50 in 1818, and fifty-three cents in 1819. The wage rates of skilled labor, on the other hand, remained stable throughout at approximately $1 per day. In Pennsylvania, woodcutters who averaged a wage of thirty-three cents per cord in the first half of the nineteenth century were paid only ten cents per cord in 1821 and 1822. Unskilled turnpike workers paid seventy-five cents a day in early 1818 received only twelve cents a day in 1819.
• 159Evidence is very scanty on the behavior of wage rates during this period. In Massachusetts, the wages of agricultural workers fluctuated sharply with the boom and contraction, averaging sixty cents per day in 1811, $1.50 in 1818, and fifty-three cents in 1819. The wage rates of skilled labor, on the other hand, remained stable throughout at approximately $1 per day. In Pennsylvania, woodcutters who averaged a wage of thirty-three cents per cord in the first half of the nineteenth century were paid only ten cents per cord in 1821 and 1822. Unskilled turnpike workers paid seventy-five cents a day in early 1818 received only twelve cents a day in 1819.
• 160One of the most significant phenomena of the depression was the advent of a new problem casting a long shadow on future events: large-scale unemployment in the cities. Although America was still an overwhelmingly rural country, the cities—the centers of manufacture and trade—were rapidly growing, and this depression witnessed the problem of unemployment for factory workers, artisans, mechanics, and other skilled craftsmen. These workers were often independent businessmen rather than employees, but their distress was not less acute. Concentrated in the cities, their plight was thereby dramatized, and they lacked the flexibility of farmers who could resort to barter or self-sufficiency production. In the fall of 1819, in thirty out of sixty branches of manufacturing (largely handicraft) in Philadelphia, employment in these fields totaled only 2,100, compared to 9,700 employed in 1815. There was a corresponding decline in total earnings—from $3 million to less than $700 thousand during the later year. Very drastic declines in employment took place in the cotton, woolen, and iron industries. Unemployment also swelled the ranks of the paupers during the depression.
• 161One of the most significant phenomena of the depression was the advent of a new problem casting a long shadow on future events: large-scale unemployment in the cities. Although America was still an overwhelmingly rural country, the cities—the centers of manufacture and trade—were rapidly growing, and this depression witnessed the problem of unemployment for factory workers, artisans, mechanics, and other skilled craftsmen. These workers were often independent businessmen rather than employees, but their distress was not less acute. Concentrated in the cities, their plight was thereby dramatized, and they lacked the flexibility of farmers who could resort to barter or self-sufficiency production. In the fall of 1819, in thirty out of sixty branches of manufacturing (largely handicraft) in Philadelphia, employment in these fields totaled only 2,100, compared to 9,700 employed in 1815. There was a corresponding decline in total earnings—from $3 million to less than $700 thousand during the later year. Very drastic declines in employment took place in the cotton, woolen, and iron industries. Unemployment also swelled the ranks of the paupers during the depression.
• 162By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 163By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 164By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 165By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 166in the modern sense.
• 167On the one hand, the boom, the crisis of 1818–19, and the depression until 1821 present many features akin to modern business cycles as interpreted by Mitchell. Although banking had previously been undeveloped, this period saw a rapid expansion of banks and bank money—unsound as much of the expansion may have been. The period also saw much of the typical characteristics of later financial panics: expansion of bank notes; followed by a specie drain from the banks both abroad and at home; and finally a crisis with a contraction of bank notes, runs on banks, and bank failures. A corollary to the contraction of loans and bank runs was the scramble for a cash position and rapid rise in interest rates during the panic. The diversity of bank notes and bank activity from section to section was hardly a modern characteristic, but there was an approach to uniformity in expansion and contraction because of the existence of the Bank of the United States. As in modern business cycles, the entire contraction and expansion cycle was fairly short-lived, totaling five or six years, and the period of crisis itself a short one. Furthermore, the sequence of phases was boom, crisis, depression, and revival as in the business cycle.
• 168On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 169On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 170On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 171On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 172One of the most vital points of difference between the economy of that period and of the modern day is the role of manufacturing. Not only was it small-scale, and even then largely (approximately two-thirds) in self-sufficient households, but the conditions of the fledgling factories differed from the rest of the economy. The factories were depressed while the rest of the community was booming, due to the postwar import of manufactured goods; their depression was continued and intensified during the panic. A crisis occurring in the midst of a depressed period—as happened to much of manufacturing in 1819—is more a feature of early pre-cyclical crisis as described by Mitchell. Furthermore, in manufacturing fields other than textiles, there were not even glimmerings of large-scale factory production. The other leading branches of manufacture, such as pot and pearl ashes, iron, soap, whiskey, candles, leather, lumber products, flour, paper, were the product of household and small-scale neighborhood manufactures. An exception was the larger flour mills, which expanded rapidly during 1815–16 to supply the booming European market. The great preponderance of flour mills, however, continued to be small, local affairs using local streams for power.
• 173One of the most vital points of difference between the economy of that period and of the modern day is the role of manufacturing. Not only was it small-scale, and even then largely (approximately two-thirds) in self-sufficient households, but the conditions of the fledgling factories differed from the rest of the economy. The factories were depressed while the rest of the community was booming, due to the postwar import of manufactured goods; their depression was continued and intensified during the panic. A crisis occurring in the midst of a depressed period—as happened to much of manufacturing in 1819—is more a feature of early pre-cyclical crisis as described by Mitchell. Furthermore, in manufacturing fields other than textiles, there were not even glimmerings of large-scale factory production. The other leading branches of manufacture, such as pot and pearl ashes, iron, soap, whiskey, candles, leather, lumber products, flour, paper, were the product of household and small-scale neighborhood manufactures. An exception was the larger flour mills, which expanded rapidly during 1815–16 to supply the booming European market. The great preponderance of flour mills, however, continued to be small, local affairs using local streams for power.
• 174One of the most vital points of difference between the economy of that period and of the modern day is the role of manufacturing. Not only was it small-scale, and even then largely (approximately two-thirds) in self-sufficient households, but the conditions of the fledgling factories differed from the rest of the economy. The factories were depressed while the rest of the community was booming, due to the postwar import of manufactured goods; their depression was continued and intensified during the panic. A crisis occurring in the midst of a depressed period—as happened to much of manufacturing in 1819—is more a feature of early pre-cyclical crisis as described by Mitchell. Furthermore, in manufacturing fields other than textiles, there were not even glimmerings of large-scale factory production. The other leading branches of manufacture, such as pot and pearl ashes, iron, soap, whiskey, candles, leather, lumber products, flour, paper, were the product of household and small-scale neighborhood manufactures. An exception was the larger flour mills, which expanded rapidly during 1815–16 to supply the booming European market. The great preponderance of flour mills, however, continued to be small, local affairs using local streams for power.
• 175With production and transportation in a relatively backward state, with such a large proportion of production on the farms and in self-sufficient households, and with the budding factory production facing a different course of economic conditions from the rest of society it is apparent that the National Bureau of Economic Research, within its own definitions, was correct in beginning its reference dates for American business cycles with the 1834–38 cycle and not earlier. On the other hand, as the greatest and last major crisis before 1836, the panic of 1819 holds considerable interest for the study of business cycles and for the present day. It was an economy in transition, as it were, to a state where business cycles as we know them would develop. Its new shaky, banking structure provided a surge of bank notes, while bringing in its wake many modern problems of money supply, bank soundness, and bank failure. Its new manufactures were the beginning of a great industrial development, and initiated national concern with foreign competition and the prosperity of industry. Extensive foreign trade brought the country in direct relationship to the fluctuations and developments in European economic conditions. Finally, urban unemployment, that modern specter, first became an object of concern with this panic.
• 176Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 177Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 178Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 179Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 180Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 181Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 182Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 183Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 184Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 185Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 186Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”