The Panic of 1837

The Democrats during the 1830s were generally a part of the “hard money” faction, which only trusted coin currency. Basically, they were stupid. I guess Andrew Jackson really was the President of the Common Man, for he knew about as much about economics as the Common Man. Jackson and the rest of the Hard-money supporters tried to move their country backward. Jackson wanted to remove fiat money and transfer back to commodity money. The fiat currency was reliable and a sign of an advanced economy. Gold and silver currency was impractical and a logistical nightmare. He was extremely hesitant of the banking system, but he had no reason to be. Without the central regulator of the United States Bank, the smaller state banks had no one to answer to. Though there was an economic boom between 1835 and 1837, the devastating collapse in 1837 would not have occurred or probably would not have been as bad if the central Bank of the United States was regulating the irresponsible overspending by the states by regulating the state banks. The state banks had a liquidity crisis and had to get loans to even transfer money to the state governments. The Panic of 1837 was not only Andrew Jackson’s fault, but also the fault of Martin Van Buren. Van Buren shared Jackson’s fear of fiat currency and therefore catalyzed the economic collapse with his specie circular. This order required that all payment for public lands were either paid in gold and silver or backed by these precious metals. People obviously did not have huge stores of gold in their backyard and could no longer buy the public lands that had generated the economic boom. Their reaction to the crisis was not much better. Van Buren attempted to implement a new financial system that simply got shut down in Congress. Stupid.

Though the causes were different, the Panic of 1837 is very similar to the economic crisis today. The lack of faith in the banking system is driving our country into a downward spiral. This event also shows that the introduction of fiat or representative currency created some hesitation. The dollar is only as valuable as society agrees it is. When a nation doubts its own currency, chaos ensues. The reaction to the crisis is very similar as well. Van Buren faced Congressional opposition which ultimately led to his inefficiency. This same obstacle slowed down the passage of the bail out plan. Though it ultimately passed, the Senate halted the process. This simply shows how much history repeats itself and it is shocking that we have not learned much since 1837.