As I've suggested before, the causes of the Panic of 1837 remain under debate. For many years, the weight of historical thinking tended to embrace the Whig viewpoint and place the blame squarely on the shoulders of Andy Jackson and the locofocos. Some combination of Jackson's war on the Second Bank of the United States, his transfer of United States deposits to the Pet Banks, and in particular the Specie Circular destabilized the money supply, resulting in a massive economic collapse.
Then the weight of historical opinion shifted more or less 180 degrees, absolving Jackson of all responsibility. Foreign events entirely outside Jackson's control, and in particular a decision by the Bank of England to increase the discount rate on American paper in an attempt to reign in a perceived specie drain from the UK to the US, led to a catastrophic decrease in the availability of credit in the US.
Most recently, however, the pendulum has been swinging back: Jackson's actions were, in fact, at the heart of the crisis. All of which leads me to the point of this post. I recently ran into a couple of articles, available online, which are well worth a read if you're interested in information about the Panic.
The first is Jessica Lepler's The Pressure of 1836: The International Origins of the Panic in 1837 (2007). Prof. Lepler is reportedly preparing a book on the Panic, based upon her Ph.D. thesis on the subject. The article in question, while perhaps less ambitious, nonetheless provides some fascinating details of the events occurring in London during 1836 and 1837. In brief, the article does not purport to grapple exactly with the underlying domestic-or-foreign debate, but instead assumes that the Bank of England's actions were central. But having said that, Prof. Lepler shows how the actions and rhetoric of Jackson and Jackson partisans (or is that partizans?) helped to create the perception in the UK that the US money supply was approaching a crisis. To the extent that perception and confidence are reality in the economic world, Andy Jackson contributed.
More radical is Peter L. Rousseau's article entitled Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837. Prof. Rousseau rejects the thesis that the BOE was a principal cause of the Panic, citing among other things timing issues. Instead he returns to a variant of the older thesis. Jacksonian legislation and policies resulted in a dramatic outflow of specie from New York Pet Banks, which held only $1.5MM of specie on May 1, 1837. When bank runs on May 8 and 9 removed $1.3MM of specie, the banks suspended payments, and events cascaded from there.
About the illustration, entitled Capitol Fashions for 1837 (New York 1837):
A caricature of President Martin Van Buren issued during the Panic of 1837, strongly critical of his continuation of predecessor Andrew Jackson's hard-money policies. Particular reference is made to the Specie Circular, a highly unpopular order issued by the Jackson administration in December 1836, directing collectors of public revenues to accept only gold or silver (i.e., "specie") in payment for public lands. Designed to curb speculation, the measure was blamed by administration critics for draining the economy of hard money and precipitating the 1837 crisis. Hearkening back to the anti-Jackson "King Andrew the First" (no. 1833-4), the artist portrays Van Buren as a monarch in a princely cloak, treading on the Constitution. He is crowned "in the name of Belzebub . . . Ragamuffin king" by a demon. Van Buren's cloak is trimmed with "shinplasters," the colloquial term for the often worthless small-denomination bank notes which proliferated during the panic. Van Buren says, "I like this cloak amazingly, for now I shall be able to put into execution my Designs without being observed by every quizing, prying Whig. I'm obliged to keep close since my Safety Fund is blown . . ." Under the Safety Fund law, passed during Van Buren's term as governor of New York, banks were required to contribute to a fund used to liquidate the obligations of banks that failed. The fund was quickly exhausted during the panic. On the walls are pictures of "Bequests of the Late Incumbent" (Andrew Jackson), including "The Hickory Stick," worshipped by the masses like the brazen serpent in the Old Testament, Jackson's spectacles and clay pipe, his hat, the Safety Fund balloon in flames, and "the Last Gold Coin," minted in 1829 (the year Jackson first took office). On the wall at right is a headless statue of Jackson holding a "veto" in his right hand (an allusion to Jackson's 1832 veto of a bill to recharter the Bank of the United States). Visible through a window is a street scene where a crowd mobs a theater exhibiting "a Real Gold Coin." Beneath Van Buren's feet are several documents, including the Specie Circular and "petitions," the missives from New York bankers and merchants which deluged the White House calling for repeal of the Circular. A document labeled "Indian claims" refers to another unpopular Jackson legacy: the numerous grievances by tribes like the Cherokees and Seminoles regarding unfair and inhumane government treaties by which they were being displaced and deprived of their lands.
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