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100 • Panic of 1837 Throughout the nineteenth century Americans lived through repeated financial panics. Serious economic dislocations began in 1819 and occurred again in 1837, 1857, 1873, and 1893. Economist John Kenneth Galbraithmusedthattheintervalsbetweenthesemajorpanicscorresponded “roughly withthe timeittookpeopletoforgetthelastdisaster.”Asthenationaleconomymatured ,withexpandingindustrializationandurbanization , the potency of financial downswings increased. The final large-scale economic disruption of the century, triggered by the Wall Street panic of May 1893, spawned five troubled years and caused the worst depression in American history, exceeding the intensity of the Great Depression of the 1930s and the recent Great Recession of 2008.1 Although the relatively short-lived Panic of 1819 shook the business community , the Panic of 1837 affected more people and was more widely felt. Itbecame,sadlyforAmericans,the“FirstGreatDepression.”Earliersome fatalists had called the Great New York Fire in December 1835, which consumedtheNewYorkStockExchangeandmostbuildingsaroundWall Street,anomenofimpendingeconomicdoom.Intheirmindsitwasasign from Providence. When disaster struck two years later, some Americans feared that depression would never lift, believing religious millennialists who claimed that end-times were near. Even a secular Philip Hone, former mayor of New York City and inveterate diary keeper, held similar thoughts. “Where will it end?” he asked. The answer he thought: “In ruin, revolution, perhaps civil war.” On April 1, 1837, the New York Herald describedthegrowingeconomiccalamitythisway :“Wallstreet[sic],andits businessneighborhood,fromrivertoriver,hasbeenforaweekinaterrible convulsion. The banks–the merchants–the brokers–the speculators, have been rolling onward together in the undistinguishable mass, down the stream of bankruptcy and ruin.”2 CrisisandContraction 5 C r i s i s a n d C o n t r a c t i o n 101 Multiple factors led to these painful events. One cause was destruction of the Second Bank of the United States–“Mr. Biddle’s bank”–by President Andrew Jackson and his anti-bank allies. The refusal on the part of Jacksonians to recharter this well-managed institution with its twenty-eight branches eliminated the only real brake on the banking system . The result was a dramatic increase in the number of state and local banks whose loans and notes, especially in the West and South, expanded in a reckless fashion. After his reelection in 1832 “Old Hickory” ordered federal funds to be deposited in “pet” banks, believing incorrectly that these institutions would be safer than the expiring “monster.” This foolish action further fostered instability and led to extensive banking fraud and mismanagement. Also contributing to the coming of hard times was the controversial Specie Circular that Jackson issued on July 11, 1836. The federalgovernmentnowrequiredgoldandsilvercoins–“specie”–andnot bank notes in payment for public lands. Soon sales plummeted. Speculators , the largest purchasers, used paper money, drawn on local banks, to buy land, and this turn of events drastically reduced a principal source of incomeforWashington.Yetthepresidentandhissupportersbelievedthat “hard money” would protect the national economy. This policy, however, drained precious metals from the East, tightened the money supply, and promoted a general uneasiness in financial centers. Actions taken by the Bank of England added to the mix of negative factors. This powerful London institution reduced its willingness to extend credit abroad, reacting to Jackson’s Specie Circular, years of global speculation, and considerable economicstressbroughtaboutbypoorgrainharveststhroughoutBritain. By 1839 credit in America had become more stringent and the money supplylimited ,hardlyhelpedbya30percentdecreaseinthecapitalofdomesticbanksbetween1836and1843 .Thesetroublingeventsledtothecollapse of world prices for cotton, America’s leading export earner and economic engine.ForSoutherners,especially,the miserablecottonmarketrevealed the danger of relying so heavily on one commodity.3 Throughout the country doubt and hesitation in business matters spread steadily, and confusion and retrenchment followed. Jobs disappeared , land values sank, and deflation spiked. In May 1837 Clarissa Gest wrote to her brother about conditions in her home city of Cincinnati, Ohio, mentioning “several failures among our speculating men” and believing “more, perhaps are expected.” She noted, too, that “Our papers say little else but hard times and worse coming. Two or three shipbuilders have given up; and several foundries, last week, discharged workmen to the number, it is thought, of 200 or more.” She ended her letter by saying, “No money can be got to defray expenses.” In February 1840, nearlythreeyearslater,conditionshaddramaticallyworsened.Explained Gest, “Times are very hard. We can scarcely get any money, and all are .135.183.187] Project MUSE (2024-04-23 19:54 GMT) T h e L o u i s v i l l e , C i n c i n n at i & C h a r l e s t o n R a i l R o a d 102 oppressed, seemingly. The poor are suffering terribly, many without food for a day...

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