The Panic of 1819: Its Impact and Legacy

Economic Turmoil in Early America: The Panic of 1819 and Its Aftermath

The Changing Landscape of Early 19^{th} Century America

• The United States was undergoing significant changes, including:

  • Westward expansion.

  • Rapid growth of cities.

  • Influx of immigrants.

  • Development of suburbs.

The Panic of 1819: America's First Economic Crisis

• Arrival of Crisis: In 1819, the United States experienced its first major economic downturn, known as the Panic of 1819.

• Public Reaction: This crisis deeply shocked the public, as it was an unprecedented event that shook the confidence of the young nation.

• Causes of the Panic:

  • Land Speculation: Widespread land speculation in the emerging Midwest (e.g., Ohio, Indiana, Illinois, Michigan) led to inflated land values.

  • Bank Practices: Banks were overvaluing land and lending money excessively to people buying it.

  • Second Bank of the United States (SBUS): The SBUS was excessively printing cash without sufficient backing from gold species (a valuable resource), which caused inflation and devalued money.

• Consequences of the Crash:

  • Inflation made money worthless, and money values dropped significantly.

  • Many people in the West could no longer afford their mortgage payments, leading to widespread bank foreclosures.

  • Banks were left with devalued land that no one had the cash (or worthwhile money) to buy.

• Duration: The panic hit acutely in 1819 and lasted until 1821, though its roots in land speculation can be traced back to 1818.

Societal Impact and Contemporary Commentary

• Visual Evidence (Primary Sources): The severe impact of the panic was captured in art and political cartoons of the period.

  • Public Auctions: A painting from the era depicts a public auction where individuals' possessions and properties were being repossessed and sold off, often at a fraction of their true worth. This led to widespread destitution and homelessness, even for those who had experienced prosperity after the War of 1812.

  • Political Cartoons: These served as scathing critiques of society during the downturn, revealing:

    • Desperation and Vice: Scenes of people on the streets, widespread drunkenness (leading to calls for temperance advocacy), prostitution, and general despair as Americans turned to various vices.

    • Bank Runs: Depictions of people rushing to banks to withdraw their money, a phenomenon that would recur in future crises like the 1929 stock market crash.

    • Symbolic Imagery: Images such as a hot air balloon crashing to earth symbolized the end of