panic of 1837causes significance and summary
Panic of 1837: Causes, Significance and Summary
It is a general tendency of many to liken the nature of the economic crisis which took place at very different periods of the timeline. The subject of discussion here is the economic crisis that triggered the panic of 1837. This Buzzle article aims to take a closer look into the causes of the event, and the subsequent result that ensued next.
Hard Money
The term coined for the use of gold or silver to make the payment for the purchase of any government land is known as the Specie Circular.Background Of The Panic
# Andrew Jackson had no faith in the national bank. There was the bank war that occurred between Andrew Jackson and the Second bank of the US. Jackson wanted to put a stop to this institution all together.
# The institution was formulated in order to handle debts the government had taken during the War which took place in 1812. However, the bank was held responsible for the series of events that caused the Panic of 1819.
# There were clashes between Andrew Jackson and the bank when he came to power as the President. Finally, all the national funds were removed by Jackson and placed in smaller state banks.
# This was the beginning of the trouble that mothered the panic of 1837. It was further enhanced by the political decisions taken by the next president of the US, Martin Van Buren.
Panic Of 1837 Summary
# This great recession turned into a panic and lasted till the mid-forties.
# The economy of America had barely recovered from the trauma of the Panic of 1819, when it was again plunged into a new one.
# Small banks grew like mushrooms during 1830s. These banks gave money as loans to all and sundry, ranging from small-time entrepreneurs, traders, farmers et al.
# This borrowed money was not used by the borrowers in their personal business requirements, but was instead, again invested in speculation ventures on land. This involved a major financial risk.
# Thus, escalated the land office businesses. There were major sales of land throughout the nation. In order to neutralize this, President Jackson ordered that the mode of payment should be gold or silver in place of money.
# This caused the sale of lands to sink, as the want of gold or silver dried up the credits of the banks. There were ample number of sellers, but there weren't any buyers.
# President Andrew Jackson, and his successor, Martin Van Buren are held accountable for the unfortunate event.
Causes Of The Panic Of 1837
To begin with, it is important to bear in mind that the prime cause of the panic was by all means monetary.# This was the time for the budding industrial era to flourish slowly and steadily. However, industrialization was blown hard by the panic.
# We have to know that at that time frame, American economy largely depended on the European economy. But, sadly, European economy was suffering acutely at that time. Hence, America suffered the same because of the related factors.
# The price of cotton in Europe declined heavily; hence the loans were to be recovered soon from those countries which received money from Europe. America received most of its funds from Europe. Europe stopped all kinds of investment in America.
# Now, we also have to understand the political folly that led to this mishap. With the expertise of Andrew Jackson, America successfully paid off all kinds of national debt. Needless to say, the economy at that time soared high.
# Now was the time when Jackson, erred. He transferred the federal money into the state banks, who in turn speculated the money at high rates. That is, they invested large sums of money with high risk of loss.
# Inflation was on the rise, and he ordered that all dealings of public land must take place in gold or silver. There was tight money. And thus came the financial crisis.
# Also, wheat was a significant crop of the US at that time. Wheat production failed, exporting wheat was not possible, financial loss incurred, and debts rose.
# Under these gory conditions, many state banks drew to a close. Thus the federal money that was deposited in these banks by the government was all lost.
# Domestic and foreign markets of the US tipped off. Banks which had credited loan to the private entities and clients demanded back the money. The ratio of imports superseded the ratio of exports.
# In such prevailing conditions there also happened the great expansions on the construction of canals and railroads, in an attempt to restore the stability, but in vain.
Significance Of The Panic Of 1837
The Panic Of 1837 was by no means a short-lived incident. The chief outcome was that, America was plunged into a prolonged 7-year depression phase which was a hard state to overcome. This phase is still remembered as one of the dark chapters in American history. The phase is known as the Great Depression. The aftermath of the Panic of 1837 can be listed as under:- Economic Depression
- Bankruptcy
- No functional factories and mills
- Unemployment
- Fight for food