Jackson+and+the+Panic+of+1837

Jackson and the Panic of 1837

Andrew Jackson didn’t like the Second Bank of the United States because he thought it was a monopoly. He advocated the use of hard coins (gold and silver) instead of paper money. This was possibly due to his high level of debt in his youth when he had borrowed too much based on the value of paper money. The U.S. Senate wanted him censured because he was talking too much against the banks and they said he was a monarchical president due to his liberal use of veto power as president. They voted to censure him, so he wrote a letter to them saying that Maine, New Jersey and Ohio agreed with his policies. In 1833, he ordered all federal deposits withdrawn from The Bank. The bank’s president, Nicholas Biddle, called in loans for immediate full payment in order to showcase a financial crisis in the country and get Jackson’s attention. It all backfired when angry businessmen and farmers blamed the bank, an action which caused it to go out of business in 1841. Similar to 2008, people were living well in the United States since the War of 1812. There was great prosperity and the harvests were abundant. A big difference was that the national debt was paid off in 1834. Imagine that! Due to the devaluation of the paper money and the enormous speculation happening in land purchasing, the bubble burst. The paper money that was in circulation became worthless because the president wanted only gold and silver to be the currency. As a result, the price of goods inflated daily. Land and goods became worthless because no one could buy them. Many people lost a lot of money. Poverty became the great equalizer among the formerly rich and poor classes. What they each did for a living didn't really matter since all were poor. The Flour Riot of 1837 or Impossible to "Let Them Eat Cake!" A side effect of this was the Flour Riot of 1837. It broke out in New York City and was the result of poverty and the rising cost of flour which was a staple ingredient for survival. It increased from $5.62 a barrel to $12.00 a barrel. A store owner, Eli Hart, was offered $8 a barrel by organized people. He didn’t show up at his store, so the people smashed the windows and rolled the barrels into the streets. The police and soldiers arrived, along with Hart, but people had taken barrels of flour and sacks of wheat by that time.

Source: [] and “The Flour Riot of 1837”

Zinn, Howard. // [|A People's History of the United States] //. New York: Perennial Classics, 2003. p.224 [|ISBN 0060528370] ~kathomp07

The Bank War started in 1829, when Preside Jackson made his antagonism toward the 2nd Bank of the U.S. clear. This came after the death of Jackson's wife as he blamed her death on slanderous comments made during the Presidential Election of 1828. In response, Biddle and Henry Clay applied to renew the bank's charter four years earlier than necessary in order to make it an election issue. But when Jackson easily won in the election of 1832 he interpreted this victory as a mandate to terminate the bank entirely. Andrew Jackson’s background contributed to his veto of the bank's charter. Jackson had owed debts to banks during his youth and was a strong advocate for hard money (coins). His negative personal experiences contributed to his hostility towards banks and the use of paper money. Jackson explained his decision in his veto message to Congress, declaring that "some of the powers and privileges possessed by the existing bank are unauthorized by the Constitution" and referring to the bank as a monopoly.

Effects of the Panic of 1837 Not only two months after the banks failed, "Out of 850 banks in the United States, 343 closed entirely, 62 failed partially, and the system of State banks received a shock from which it never fully recovered." Not until six years later did the economy recover in 1843. According to wikipedia, “In 1835, Jackson managed to reduce the federal debt to only $33,733.05, the lowest it had been since the first fiscal year of 1791. President Jackson is the only president in United States history to have paid off the national debt. However, this accomplishment was short lived with the Panic of 1837 when when every bank stopped payments. ~caseyysmith12

1837 U.S. caricature on the financial panic of that year

SUMMARY: A commentary on the depressed state of the American economy, particularly in New York, during the financial panic of 1837. Again, the blame is laid on the treasury policies of Andrew Jackson, whose hat, spectacles, and clay pipe with the word "Glory" appear in the sky overhead. Clay illustrates some of the effects of the depression in a fanciful street scene, with emphasis on the plight of the working class. A panorama of offices, rooming houses, and shops reflects the hard times. The Customs House, carrying a sign "All Bonds must be paid in Specie," is idle. In contrast, the Mechanics Bank next door, which displays a sign "No specie payments made here," is mobbed by frantic customers. Principal figures are (from left to right): a mother with infant (sprawled on a straw mat), an intoxicated Bowery tough, a militiaman (seated, smoking), a banker or landlord encountering a begging widow with child, a barefoot sailor, a driver or husbandman, a Scotch mason (seated on the ground), and a carpenter. These are in contrast to the prosperous attorney "Peter Pillage," who is collected by an elegant carriage at the far right. In the background are a river, Bridewell debtors prison, and an almshouse. A punctured balloon marked "Safety Fund" falls from the sky. The print was issued in July 1837. A flag flying on the left has the sarcastic words, "July 4th 1837 61st Anniversary of our Independence."
 * -CarJim**

Unfortunately no practical measures were at first instituted to relieve the distresses of the working classes, and advantage was taken of the opportunity by politicians and demagogues to inflame the passions of the ignorant and the vicious.

The economic harvest of the Jackson years is the Panic of 1837, with an ensuing depression. During these years cotton production increased in the South, agriculture expanded in the West, cities grew, manufacturing replaced trade as the economic base in the North. These phenomena were accompanied by a rise in the sales of land, and also in the price paid for land. There was a need for internal improvements, roads, canals, etc. and these had to be financed by states and private companies. Inevitably, speculation and inflation accompanied such activities, and President Jackson hoped to curb the unhealthy aspects of a growing economy by extirpating the central bank, which he considered the root of the evil. But with Federal funds distributed widely in "pet banks" and surplus revenues distributed among the states, the control exercised by the Bank of the United States is replaced by financial anarchy: the number of banks and the number of bank notes increase. In response to the President's Specie Circular issued in 1836, the local banks are faced with a critical situation, and call in their loans. (At the same time, a depression in Great Britain results in withdrawals of British investments and a decline in the demand for cotton.) First the New York City Banks suspend specie payment; then others follow suit. Lacking sufficient hard money, banks fail, enterprises go bankrupt, unemployment spreads. As the depression deepens, President Van Buren continues to follow Jackson's policy, with the ill-advised codicil of a plan to fragment the single treasury into a system of "sub-treasuries."

http://thehistorybox.com/ny_city/panics/panics_article5a.htm

Sounds very similar to what just happened a few years ago ... with some minor changes, of course.

The 1830’s began as a time of expansion and prosperity, with significant economic growth attributed to the construction of railroads and canals. The government sold millions of acres of public lands to speculators and these sales, combined with the Tariff of 1833, supplied the Treasury with significant amounts of money. As Andrew Jackson had desired, the government was able to pay off the national debt, and the Treasury even began to accumulate a surplus. They distributed this surplus to the states and the money was further invested into the construction of railroads and canals. It became common for both state governments and individuals to discharge debts with paper bank notes rather than gold or silver. This alarmed Jackson because he feared that the banks had too much power, so he issued the Specie Circular, which ordered the Treasury to desist from accepting paper notes as payment for land sales. Banks reacted by restricting credit and calling in loans, which caused a panic (known as “The Panic of 1837”) and led to high rates of unemployment and an economic depression which impacted the country through 1843. -- Dea_De_Amore

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