Panic of 1837

The beginning of using paper currency

Created by Robert Morris, the Financier of the Continental Congress, the Bank of North America had two purposes: to create a strong currency and fund the was against Great Britain from the loans provided by France and the Netherlands. Even though the bank would remain private it would remain a powerful source of finance through the 1800s as it provided support to the Federal Government through loans in support of the War of 1812 and the Civil War

Because of the fighting the United States was involved in it caused us to accumulate a large debt. It seemed that the government wouldn’t be able to pay the payments on the loans and caused the value of the American dollar to plummet. This led to the government putting a halt to exchanging gold and silver for bank notes.

Many stockbrokers were “buying on the margins” or buying stocks with other stocks. This led to the explosion in the New York Stock Exchange but was all fed by speculation. Then on “Black Tuesday” it all came crashing down seeing the stock market losing 25% of its value over the course of two days. Over 4,000 banks couldn’t pay out all their deposits during the bank runs, the dust bowl saw many farmers go bankrupt which contributed to the rise in unemployment reaching 25% of Americans without a job during the peak of the Great Depression.

The United States saw a rise in housing cost and household debt the access to easy credit and lax loan standards led to more people taking debt to buy more expensive homes, but this all came down when the New York Stock Exchange entered a downward spiral. This spread to causing high unemployment as many families and their nations couldn’t pay off the debt they all accumulated during the housing boom.