Panic 1837 The depression of 1937 was sometimes also referred to as The Panic of 1837. The true panic of this depression consisted of banks over- extending credit on insufficient collateral as well as a shortage of the nations currency. The shortage of currency failed to meet the demands of the country at a time when the nation was prospering, the railroad was laying tracks and extending outward, and canals were being built to make even more routes of transportation. Basically, people were spending money and investors were buying in to the American corporations and state bonds. In the book American History a Survey (268), it is stated that during 1835 – 1837 nearly 40 million acres of land were bought and sold in the nation to immigrants who had little or no money. The land was sold on credit at greatly advanced prices.
However, investors who were mostly Eastern speculators from the United States coming here to take advantage of the situation were buying most of the land. They had hopes to re-sale and make a profit. Their form of payment for this land was usually loans from banks. At the same time, the money from these land sales was coming in to the US treasury from land office, and most of it was of dubious value. In short, the government was selling acres of land and, in return, receiving a miscellaneous collection of state bank notes, none of which was really worth the stated value.
In a lecture delivered before the Sunday lecture society, May 7, 1876, by John Wentworth, Mr. Wentworth told people the government was not only out of debt, that it also had an existing surplus of funds. At this point, men became excited and reckless, as money was taken from every branch of business to invest in western land speculators. However, President Jackson was aware of the situation, but had no power to stop the land sales or limit bank discounts. The presidents plan to solve the issue as noted in the book American History A Survey (269), was to order that nothing but gold or silver could be exchanged for public lands.
This was called his Specie Circular in 1836. This new concept for land purchases was just a sign of the trouble and panic that was ahead for the country. The people would begin to experience a shortage of paper money, the precious metals would be driven out of the country, and the banks would not have the resources to claim any bills. Thus, the nations banks would fail to survive. Consequently, many corporations and small businesses, as well as individual workers would also suffer. Soon, corporations and individual businesses everywhere began to issue certificates that would be redeemed at their business.
These tickets would be valid for items and services such as barber services and food staples. In other words, to get a haircut or buy a loaf of bread you needed a ticket or certificate. Debts were all paid without the form of paper money. The public soon became leery of using the tickets, and had figured out that there was a shortage of currency. Previously, the people had been purchasing things they did not need, and for which they could not pay.
And when their finances failed, they blamed it on the president. In John Wentworths lecture he stated the signs of economic collapse were present before President Jackson fulfilled his term and left office. The interest rates climbed over 20%, cotton prices spiraled crazily, and food riots erupted in New York City. The inflated land values, speculation, and wildcat banking contributed to the crisis which became known as the Hard Times of 1837-1843. In the paper Panic of 1837 written by the PEI History Department, it was researched and written that: over 39,000 Americans went bankrupt, losing 741 million dollars as the depression reduced many people to the streets and also to starvation. This depression also spread across the ocean to Britain and the rest of Europe. From a lithograph (courtesy of the New York Historical Society, New York, published in the book American History A Survey, on the 4th of July 1837) it showed just how the depression was affecting the people.
For example, many people were not watching the fireworks or parade celebrating of our countrys 61st year of independence; but, instead, they were preoccupied with their own troubles. Many people were standing idle with the tools of their trade in hand, while others who were un-employed stood in lines to do business with the local pawnshop to seek loans to buy liquor. There was also a line at the local bank where depositors tried desperately to get cash for their worthless bank notes. The sheriffs office was also busy where property was being sold due to unpaid taxes. The sub-treasuries plan of Van Buren turned out to be a weak and ineffective plan for the independent treasury to deal with economic depression.
As a result, the damage was insurmountable for his presidency. Passing the bill for his plan took the remainder of his term. By then, the economic storm had raged long and harsh on businesses and workers. Even two years later with the induction of the new president, Van Buren, and the issuing of US Treasury notes, these efforts still did not ease any of the financial crisis on the nation. According to the PEI History department, in the paper titled The Panic of 1837, the crisis was described as a situation involving an unstable currency and financial system resulting in a lack of confidence in both government and the banks. Bibliography WORKS CITED Bailey, Kennedy, Cohen. The American Pageant Volume I: To 1877. New York, Houghton, 1998. Current, Williams, Freidel. American History A Survey.
New York, Knopf, 1971. PEI History Department. Panic of 1837. http://www.pei-intl.com/Research/PANICS/1837/1837. HTM Wentworth, John. The Panic of 1837. Sunday Lecture Society, 1876, http://www.adena.com/adena/usa/hs/hso1.htm History Reports.