financial structureThe Panic of 1837 was the culmination of a series of policy shifts and unanticipated disturbances that shook the young U.S. economy at the core of its financial structure – the banks of New York City. Over the nine months leading up to the crisis, the specie reserves of these banks came under increasing strain as they reacted to legislation designed to achieve a “political” distribution of the surplus balances among the states and an executive order allegedly aimed at ending speculation in the public lands. With much of the nation’s specie diverted from its commercial center, the prospect of shifts in specie demand both domestically and from abroad combined with a break in land prices to render the panic inevitable. The U.S economy is ready to provide their citizens with the all necessary goods and money is not an exception. Money is not an easy thing to be earned and saved that’s why more and more people live on tick moreover the majority of them take speedy loans on and are glan to command their service. it is very comfartable to get money without standing in the long queues.

This description reaffirms one important aspect of the traditional view, namely that the Specie Circular was pivotal. Had the Circular not been enacted, the original set of transfers ordered by the Treasury, both official and supplemental, could have been executed as planned. And though this account argues that the orders were far more disruptive than earlier explanations of the panic have presumed, the New York banks had time to prepare for them. It was the Specie Circular that exacerbated the drain of specie from New York to fuel the continued sales of public lands, and even forced a frantic attempt by the Treasury to alter the orders to redirect specie from West to East late in the Fall of 1836. When the noose tightened around the New York money market just as the huge transfers scheduled for early 1837 came due, the only remedy that remained was repeal of the Specie Circular. President Van Buren’s refusal to reverse his predecessor’s policy upon inauguration in March of 1837, despite the passage of legislation by both Houses of Congress, effectively sealed the nation’s fate. International factors added pressure to an already volatile situation by late April and early May, but any demands for specie from abroad would have been absorbed by a New York money market that had not been subjected to such a severe internal drain.

The Jackson presidency was among the most influential in U.S. history. Many beliefs about the optimal size and scope of government and banking that hold sway in popular culture to this day have their roots in the Jacksonian era. Perhaps, however, the hero of the Battle of New Orleans inadvertently taught the nation another important lesson early in its history that economists and policymakers alike have come to recognize and accept — that when faced with a limited set of monetary instruments for achieving specific objectives, the possibility of unexpectedly severe general equilibrium effects from any given choice makes some degree of flexibility critical in averting the types of crises that can arrest economic growth.