Panic of 1837

The Panic of 1837 was an economic depression, one of the most severe financial crises in the history of the United States. The Panic was built on a speculative fever. The bubble burst on May 10, 1837 in New York City, when every bank stopped payment in specie (gold and silver coinage). The Panic was followed by a five-year depression, with the failure of banks and record unemployment levels.

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 the United States, resulting in the withdrawal of government funds from that bank. Martin Van Buren, Jackson's hand-picked heir apparent, 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. Democratic Jacksonians blamed bank irresponsibility, both in causing rampant speculation and by introducing paper money inflation. This was caused by banks issuing notes — paper money — they couldn't redeem in gold or silver coin (known then as "hard money"); these notes then lost value over time, so that more were needed to buy the same thing as had been bought before for less. There were many scraps of paper in circulation, each owner anxious to redeem them as soon as possible for "real" (i.e., hard) money; "dollar" was a relative term with bank currency.