The Panic of 1819 was the first major financial crisis in the United States. It featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It marked the end of the economic expansion that had followed the War of 1812. A currency crisis (also known as a financial crisis) occurs when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange or a store of value. ... Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of... This article does not cite any references or sources. ... Manufacturing (from Latin manu factura, making by hand) is the use of tools and labor to make things for use or sale. ... The United States has the worlds largest gross domestic product (GDP), $13. ... Combatants United States British Empire: United Kingdom Upper Canada Lower Canada Newfoundland Nova Scotia Bermuda Eastern Woodland Indians Commanders James Madison Henry Dearborn Jacob Brown Winfield Scott Andrew Jackson George Prevost Isaac Brock† Tecumseh† Strength •United States Regular Army: 35,800 •Rangers: 3,049 •Militia: 458,463* •US Navy & US...

Explanations

Different economic schools of thought have offered explanations for the Panic of 1819.

Austrian school

The Austrian school gives the following explanation: Government borrowed heavily to finance the War of 1812. This caused tremendous strain on the banks’ reserves of specie, and led inevitably to a suspension of specie payments in 1814. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues. The Austrian School, also known as the Vienna School or the Psychological School, is a school of economic thought that advocates adherence to strict methodological individualism. ... A commodity metal, historically gold and silver, backing money or currency. ... Year 1814 (MDCCCXIV) was a common year starting on Saturday (link will display the full calendar). ... An obligation can be legal or moral. ... This article does not cite any references or sources. ... A £20 Ulster Bank banknote. ...

The newly issued bank notes misled investors into believing that society's time preference had decreased. In other words, it appeared as though the total supply of investment capital had increased. In response, a post-1812 boom began, fueled by rampant speculation in land, and also projects such as turnpikes and farm improvement vehicles. However, since time preferences had not really changed, these investments were not sustainable. Time preference is the economists assumption that a consumer will place a premium on enjoyment nearer in time over more remote enjoyment. ... Invest redirects here. ... Capital has a number of related meanings in economics, finance and accounting. ... In economics, the term boom and bust refers to the movement of an economy through economic cycles due to changes in aggregate demand. ... Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ... A toll road, turnpike or tollpike is a road on which a toll authority collects a fee for use. ...

It soon became clear that the monetary situation was in bad shape, with a return to specie payments becoming increasingly untenable. A nationwide return to specie would not be possible without a massive contraction in credit. Faced with these threatening circumstances, the Second Bank of the United States was forced to call a halt to its expansion and launch a painful process of contraction. There was a wave of bankruptcies, bank failures, and bank runs. Prices dropped and wide-scale urban unemployment began. Moneys is an agreement within a community, to use something as a medium of exchange, which acts as an intermediary market good. ... An economic contraction is a reduction in goods and services for sale in the market place. ... Credit as a financial term, used in such terms as credit card, refers to the granting of a loan and the creation of debt. ... The Second Bank of the United States was a bank chartered in 1816, five years after the expiration of the First Bank of the United States. ... Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. ... Crowded Shibuya, Tokyo shopping district An urban area is an area with an increased density of human-created structures in comparison to the areas surrounding it. ... This article does not cite any references or sources. ...

The Panic of 1819 was caused partially by international events. European demand for American foodstuffs was increased because the Napoleonic Wars decimated the agriculture in Europe. War and revolution in the New World destroyed the supply line of precious metals from Mexico and Peru to Europe. Without the base of the international money supply, poor European governments hoarded all the available specie. This caused American bankers and businessmen to start issuing false banknotes and expanding credit. American bankers, who had little experience with corporate charters, promissory notes, bills of exchange, or stocks and bonds, encouraged the speculated boom during the first years of the market revolution. This article does not cite any references or sources. ... A European is primarily a person who was born into one of the countries within the continent of Europe. ... Combatants Austria[1] Portugal Prussia[1] Russia[2] Sicily  Spain[3]  Sweden United Kingdom[4] French Empire Holland Italy Naples [5] Duchy of Warsaw Bavaria[6] Saxony[7] Denmark-Norway [8] Commanders Archduke Charles Prince Schwarzenberg Karl Mack von Leiberich Gebhard von Blücher Duke of Brunswick â€  Prince of Hohenlohe... For other uses, see War (disambiguation). ... The storming of the Bastille, 14 July 1789 during the French Revolution. ... Frontispiece of Peter Martyr dAnghieras De orbe novo (On the New World). Carte dAmérique, Guillaume Delisle, 1722. ... For other uses, see Europe (disambiguation). ... A European is primarily a person who was born into one of the countries within the continent of Europe. ... A charter is a document bestowing certain rights on a town, city, university or institution. ... A promissory note is a contract detailing the terms of a promise by one party (the maker) to pay a sum of money to the other (the payee). ... A negotiable instrument is a specialized type of contract which obligates a party to pay a certain sum of money on specified terms. ... This article does not cite any references or sources. ... For alternative meanings, see bond (a disambiguation page). ...

Small, local ups and downs had occurred in the market since the 1790s, but never to this magnitude. Businesses went bankrupt when they could not meet their debts, and hundreds of thousands of wage workers lost their jobs. For example unemployment reached 75 percent in the American city of Philadelphia, and 1,800 workers were imprisoned for debt. In Baltimore, the unemployed set up a city of tents on the outskirts of the city. Nickname: City of Brotherly Love, Philly, the Quaker City Motto: Philadelphia maneto (Let brotherly love continue) Location in Pennsylvania Coordinates: Country United States State Pennsylvania County Philadelphia Founded October 27, 1682 Incorporated October 25, 1701 Mayor John F. Street (D) Area    - City 369. ... This article does not cite any references or sources. ... Baltimore redirects here. ...

Other views

Some non-Austrian economists view the nationwide depression that resulted from the Panic of 1819 as the first failure of the market economy. A recession is traditionally defined in macroeconomics as a decline in a countrys real Gross Domestic Product (GDP) for two or more successive quarters of a year (equivalently, two consecutive quarters of negative real economic growth). ... This article needs additional references or sources to facilitate its verification. ...

Economists outside the Austrian tradition, who adhere to more mainstream theory also suggest that the Panic of 1819 was the early Republic's first experience with the boom-bust cycles common to all modern economies. Clyde Haulman, Professor of Economics at the College of William and Mary (Clyde Haulman's Homepage), suggests that the Panic was more complex than the Austrian school would suggest. It was not primarily a failure of the banking system following the War of 1812. Indeed, rather than being the first failure of the market economy in America, the Panic of 1819 marked the beginning of a new phase of American economic history, where mature market institutions would continue to move cyclically from boom to bust. These explanations are not intended to discount the importance of war-time public finance as a cause of the Panic. They simply acknowledge that there were broader, institutionally based causes for the events of 1819 and the early 1820's. ^{[citation needed]}

Proposed remedies

Proposed remedies included:

• increase of tariffs (largely proposed by Northern manufacturing interests).
• reduction of tariffs (largely proposed by Southerners, who believed free trade would stimulate the economy and increase demand).
• monetary expansion; i.e., restriction or suspension of specie payment.
• rigid enforcement of specie payment.
• restriction of bank credit.
• direct relief of debtors.
• public works proposals.
• stricter enforcement of anti-usury laws.
• abolition of the national bank (the Second Bank of the United States).

In the event, President Monroe, interpreting the economic crisis in the narrow monetary terms then current, limited governmental action to economizing and to ensuring fiscal stability. Although he agreed to the need for improved transportation facilities, he refused to approve appropriations for internal improvements without prior amendment of the Constitution. This article does not cite any references or sources. ... It has been suggested that Middle Atlantic States be merged into this article or section. ... The U.S. Southern states or the South, also known colloquially as Dixie, constitute a distinctive region covering a large portion of the United States, with its own unique heritage, historical perspective, customs, musical styles, and cuisine. ... A currency is a unit of exchange, facilitating the transfer of goods and services. ...

The worst of the crisis was over by 1824, and the rest of the decade saw a gradual recovery of the U.S. economy. It was the nation's first experience with the mysteries and miseries of the business cycle. 1824 was a leap year starting on Thursday (see link for calendar). ... // [edit] Introduction [edit] Definition If we were to take snapshots of an economy at different points in time, no two photos would look alike. ...

See also

• Great Depression

For other uses, see The Great Depression (disambiguation). ...

Further reading

• Robert Sobel Panic on Wall Street: A Classic History of America's Financial Disasters-With a New Exploration of the Crash of 1987 (E P Dutton; Reprint edition, May 1988) ISBN 0-525-48404-3.

Robert Sobel in a promotional photo for his publisher. ... Year 1988 (MCMLXXXVIII) was a leap year starting on Friday (link displays 1988 Gregorian calendar). ...

External links

• Murray N. Rothbard. Panic of 1819: Reactions and Policies