The Panic of 1819 for kids: Background History
The War of 1812 between the US and
Great Britain had
ended in a stalemate, and massive war debts, but gave the United
States the confidence to consider itself as
a strong, unified and independent
nation. The political calm in the country led to the period known as
the Era of Good Feelings. The
government introduced an
economic plan aimed at improving the
economy of the US. The nation's economic plan was based on a new
national bank to provide credit to Americans, taxing foreign goods
to raise income and creating a subsidized transportation
infrastructure of new roads and canals to enable
Westward
Expansion
to new lands with more settlers becoming farmers. The plan was
initiated by Henry Clay and was called the
'American System'. The
establishment of the Second Bank of
the United States
was part of the economic plan to reach these goals. President James
Madison, with the approval of Congress, granted a charter to the
Second Bank of the United States in 1816 which was a
privately held banking corporation.
What were the Causes of the Panic of 1819?
There were many causes of the Panic of 1819
including those
are
detailed in the following fact sheet.
What were the Causes of the Panic of 1819?
Panic of 1819 Causes:
Westward expansion:
The government offered vast tracts of western land for
sale. This fueled real estate speculation that was
funded by increased availability of credit from the
Second Bank of the United States and new, reckless
frontier banks
Panic of 1819 Causes:
The number of banks
in the United States more than doubled between 1812 and
1819
Panic of 1819 Causes:
The Banks were unregulated and began to issue massive
amounts of bank notes. The bank notes were not backed by
gold and silver.
● Banks issued
notes far in excess of their specie deposits (see
Promissory Notes below)
● In other words
bank's capital was based on IOU's
Panic of 1819 Causes:
State banks were
chartered for the express purpose of extending credit to
speculators
Panic of 1819 Causes:
Easy credit was
obtained by high-risk debtors including many farmers
Panic of 1819 Causes:
An International
financial crisis emerged (a global credit crunch, banks
were restricting credit and loans were being called in)
Panic of 1819 Causes:
A
trade deficit in the U.S. was caused by a downturn in
exports and strong price competition from foreign goods
● Increasing crop
yields in Europe reduced the demand for American
farm products, especially wheat, cotton and tobacco,
and prices for these products plunged
● Demand for
manufactured goods also decreased
Panic of 1819 Causes:
The bad management of poor banking policies of the state
banks and the Second Bank of the United States
● The first
president of the Second Bank of the United States
was William Jones, a political appointee who had
gone bankrupt (refer to the
Spoils System for
more info)
● William Jones
first extending far too much credit and then
panicked and restricted it too quickly
Panic of 1819 Causes:
In
1819 Langdon Cheves replaced William Jones as president
of the Second Bank of the United States. To combat the
economic crisis he put into place a number of measures
● Fewer loans were
extended
● The number of
notes in circulation were halved
● He presented
state banknotes to banks for specie (gold and silver
coins)
● He foreclosed on
mortgages
These are the causes
of the Panic of 1819, its subsequent effects are
detailed in the next table.
What were the Causes of the Panic of 1819?
The Panic of 1819 for kids: Promissory Notes
Promissory
Notes
The capital of the banks were made up from
promissory notes like the example in the picture
● A promissory note
was a signed document containing a written promise
to pay a stated sum in gold or silver to a specified
person at a specified date or on demand
Section 8 of the Constitution permits Congress to coin
money and to regulate its value. Section 10 of the
Constitution denies states the right to coin or to print
their own money.
The Panic of 1819 for
kids
The info about
Panic of 1819 provides interesting facts and
important information about this important event that occured during the presidency of the 5th President of the United States of America.
What were the Effects of the Panic of 1819?
The terrible effects of the Panic of 1819
are
detailed in the following fact sheet.
What were the Effects of the Panic of 1819?
Panic of 1819
Effects:
Banks went into
bankruptcy - they did not have enough gold and silver to
cover withdrawal requests
Panic of 1819
Effects:
The banks had to
demand payment of debts by the farmers of the Midwest
Panic of 1819
Effects:
The banks had to
demand payment of debts by the industrialists and
manufacturers
Panic of 1819
Effects:
The ability to obtain
easy credit, or extend credit, disappeared
Panic of 1819
Effects:
The value of land
decreased - land sold for up to $70 an acre dropped in
value to only $2 an acre
Panic of 1819
Effects:
Demand for manufactured goods also decreased
Panic of 1819
Effects:
The prices of products plunged and inflation rose
Panic of 1819
Effects:
There were foreclosures, numerous people were made
homeless and lost their farms and businesses
● A foreclosure is
the process of taking possession of a mortgaged
property as a result of the mortgagor's failure to
keep up mortgage payments
Panic of 1819
Effects:
There were numerous bankruptcies
● A bankruptcy is
financial ruin caused by not having the money needed
to pay your debts
Panic of 1819
Effects:
People were thrown into debtors prisons
Panic of 1819
Effects:
Widespread unemployment was triggered
Panic of 1819
Effects:
The gross mismanagement of the Second Bank of the United
States reduced the effectiveness and belief in the
American System
Panic of 1819
Effects:
The nation suffered a depression for the next two years
These are the effects
of the Panic of 1819 and the disastrous toll it took on
the Nation and the American people
What were the Effects of the Panic of 1819?
The Significance of the Panic of 1819:
What was the significance of the Panic of 1819? The Rush-Bagot
agreement was significant because:
● The Land
Act of 1820 was passed abandoning the credit system for buying
public lands and led to the future confiscation of land from
Native Americans and lower cost lands for settlers in the west
● There were
calls for additional protective economic policies which led to
the
1828 Tariff of Abominations
and the
Nullification Crisis
● The
experiences suffered by so many Americans fostered a profound
mistrust of banks, bankers and paper money
● The Panic
of 1819 led to the future
Bank War
waged by President Andrew Jackson and the issue of the
Specie Circular
Also refer to the article on
the
Panic of 1837.
The Panic of 1819 for kids: Additional Information
The Panic of 1819 was one of a series of financial
crisis to cripple the economy of the United States -
refer to the
Bank War,
the
Panic of 1837
and the
Panic of
1857 for
additional facts and information.
The Panic of 1819 for kids - President James Monroe Video
The article on the
Panic of 1819 provides an overview of one of the Important
events in his presidential term in office. The following
James Monroe video will
give you additional important facts and dates about the political events experienced by the 5th American President whose presidency spanned from March 4, 1817 to March 4, 1825.
The Panic of 1819
●
Interesting Facts about Panic of 1819 for kids and schools
●
James Monroe and the
Demilitarizing the Great Lakes
regions
●
Definition of the Panic of 1819
●
James Monroe Presidency from March 4, 1817 to March 4, 1825
●
Fast, fun, interesting facts on the Treaty and Agreement
● An
interchange of notes
●
James Monroe Presidency and Panic of 1819 for schools,
homework, kids and children |