Did the Bank War cause the Panic of 1837? Richard Hofstadter from The American Political Tradition and the Men Who Made It believes President Andrew Jackson’s refusal to recharter the Bank of the United States was politically popular but economically harmful to the long-term growth of the United States. Peter Tenim, from The Jacksonian Economy, believes international factors, such as changes in the monetary policies of the Bank of England, the supply of silver from Mexico, and the price of southern cotton, were far more important than Jackson’s banking policies in determining fluctuations in the 1830s economy.
The two intelligent men present their facts and arguments well and make it hard for the reader to mold their opinion for either side. After reading both arguments and thoroughly reviewing the facts stated, I took the side of Peter Tenim by saying that the war against the Bank of the United States was not the cause of the Panic of 1837. I have to agree with Mr. Tenim simply because there were more factors present in his opinion involving the Panic of 1837. The opinion of Mr. Hofstadter revolved around one factor, which was the war against the Bank of the United States. In order to somewhat disprove Mr. Hofstadter’s theory, I believe we have to analyze the relationship between President Andrew Jackson and Nicholas Biddle, who at the time was the President of the Bank. Mr. Jackson was very much a man of the middle class. He believed in the American dream of becoming an entrepreneur and the opportunity to create wealth for oneself. He disliked the cheap and sometimes-worthless paper money the banks printed. The only money he trusted was hard money, gold and silver. He was especially bitter against the Bank of the United States, which with its monopoly of the government’s business was a symbol of all hated special privilege.
He thought it was evil as well as unconstitutional, and he loathed it. More impo! rtantly though, he was a person who had experience using the so-called capital makers of the time and trying to start businesses. For example, the one time in his career President Jackson owned land, which he sold to various individual and received notes as payments. Unfortunately, these buyers were unable to pay back the notes and President Jackson lost his land. He then had to start from scratch. He also had become a debtor and due to financial hardships, he was unable to pay off his own debts.
President Jackson was faced with a double-sided sword because people were unable to repay the debts owed to him, while at the same time he could not pay the debts he owed to others. Nicholas Biddle, on the other hand, was an entirely different man. Biddle knew how Jackson felt about the Bank but wanted the President to be on good terms with it. Henry Clay, though, saw the Bank issue as a way to defeat Jackson in the 1832 election. Clay induced Biddle to apply for a new charte! r for the Bank early in 1832. He believed that if Jackson dared to veto the recharter bill, he would lose the election.
The plan did not go according for Mr. Clay and Mr. Biddle and Jackson was still the favorite among the people. President Jackson and Nicholas Biddle were never met good terms with each other and their relationship was one of argument and disagreement. In my opinion, Biddle wanted to keep the Bank of the United States intact for the sole purpose of benefiting the aristocrats and the politically involved. Biddle was not, though, the cause of the Panic of 1837. The depression of the early 1840s was neither as serious as historians assume nor the fault of Biddle.
It was primarily a deflation, as opposed to a decline in production, and it was produced by events over which Biddle had little control over. Mr. Jackson’s view of banks was a very distressing one. He, along with the people of his party, believed the same ideology that the banks were in favor of the wealthy and those with political advantage. The only people who benefited from the banks were the “wall-street” types and people who had a rather great influence in the political arena. I believe that President Jackson wanted to de-centralize the bank and make it into a more state level.
While Biddle was a major force behind the powerful Bank of the United States becoming more centralized. As far as I can see, the Bank War was basically summed up in the following question. Should the United States Bank act as king over the smaller banks? This was a very political debate and I believe it aided in the Panic of 1837, but was not the primary cause. During these times, there was a great “boom” period. Farmers and trade people were looking forward to making their own businesses and sharing in the wealth available.
With industrialization taking place, economic growth in the United States was at an all time high. This boom was one of the largest producers of the Panic of 1837. It resulted from a combination of large capital imports from England a change in the Chinese desire for silver, which together produced a rapid increase in the quantity of silver in the United States. Banks did not expand their operations because they were treating the government deposits as reserves. They expanded because their specie reserves had risen.
The Panic of 1837 was not caused by President Jackson’s actions. The destruction of the Bank of the United States did not produce the crisis because it did not produce the boom. Many opinions on the subject of the Bank War have been used and quoted but none as often as those of Nicholas Biddle and Albert Gallatin. Biddle is quoted on saying: “In my judgment, the main cause of it the crisis is the mismanagement of the revenue. Mismanagement in two respects: the mode of executing the distribution law, and the order requiring specie for the public lands. Gallatin took another road by announcing “Overtrading has been the primary cause of the present crisis in America. ” The two did not agree with each other nor did they think of each other’s opinions. I believe that international factors were the main cause of the Panic of 1837. The Bank War coincided with two developments, one in England and one in China that together produced inflation. A large series of good harvests in England initiated a boom in the country around 1832. The British became eager to invest in the United States and to buy American cotton.
In order for the British to export capital to the United States, the United States had to buy more in Britain than it sold, which would result in a trade deficit. And in order for the American demand for British goods to rise, prices in the United States had to rise to make imported goods cheaper than domestically produced ones. The demand for cotton in Britain caused prices in America to rise higher than they would have. At the same time, American exports were increasing as were American imports, therefore a trade deficit was harder to produce.
Alongside this problem, changes were taking place in China. Opium purchases were increasing and no longer wanted silver to hoard. They wanted to trade silver for opium and any silver sent by the United States would then be sent to England in payment for Indian opium. This transshipment was avoided by substituting American credit for Mexican silver. The silver from Mexico went into bank reserves in America, allowing prices to rise and the demand for imports to increase. The final international problem I will discuss is the British demand for our cotton.
This demand helped to increase the inflation by reducing the American trade deficit, but it also put down the inflation by setting off a land boom. The price of cotton soared, land sales rose dramatically and part of the increase in money supply went into land purchases. The government continued to sell land at a constant price, and funds that otherwise would have been used to raise prices just stayed in the government’s surplus. The boom caused inflation to run rampant and the American! economy was beginning to give way to a panic.
Blaming the Panic of 1837 on President Jackson is an ignorant statement. How can anyone say that this lone factor caused a huge economic failure in the United States? This panic had to have been brought on by multiple factors of an international level. Our trade partners at the time all contributed to the downfall of our economy. President Jackson’s decision could have been another factor leading into a panic, but in no way was it the only reason for the economic problems that plagued the American people for years.
