Facultad

The Panic of 1837 was a financial crisis in the United States built on a speculative fever.[1] The end of the Second Bank of the United States had produced a period of runaway inflation, but on May10, 1837 in New York City, every bank began to accept payment only in specie (gold and silver coinage), forcing a dramatic, deflationary backlash. This was based on the assumption by former president,Andrew Jackson, that government was selling land for state bank notes of questionable value. The Panic was followed by a five-year depression, with the failure of banks and then-record-highunemployment levels.
Causes
Some causes include the economic policies of President Andrew Jackson who created the Specie Circular by executive order and also refused to renew the charter of Second Bank of theUnited States, resulting in the withdrawal of government funds from that bank. Martin Van Buren, who became president in March 1837, five weeks before the Panic engulfed the young republic's economy,was blamed for the Panic. His refusal to involve the government in the economy was said by some to have contributed to the damages and duration of the Panic. Jacksonian Democrats blamed the banks'irresponsibility, both in funding rampant speculation and in introducing paper money inflation. This was caused by banks' issuing excessive paper money (unbacked by bullion reserves), leading toinflation.

Others take a different view, blaming a combination of the Second Bank of the United States, Mexican bimetallism (which drove Mexican silver out of Mexican circulation according to Gresham'sLaw, and into America where it was legal tender), legal tender law, fractional reserve banking, and state government deficit spending, which dramatically increased the money and credit supply, decreasedinterest rates, and led to erroneous investment decisions before and up to 1837, according to the Austrian Theory of the Business Cycle.

Emerson essay, “The American Scholar”

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