Panic of 1819 begins
- When
- 1818–1819
- Where
- United States; Philadelphia; Second Bank of the United States
- Episodes
- 3
The Panic of 1819 was the first widespread and durable financial crisis in the United States, followed by a general economic collapse persisting through 1821. It arose from post-war inflationary bubbles, European agricultural recovery, and credit contraction directed by the Second Bank of the United States. The crisis heralded the nation's transition from colonial commercial status toward an independent economy.
Episodes
- Credit Contraction
The Second Bank initiated a sharp credit contraction in summer 1818, rejecting state banknotes in August.
- Bank Stabilization
Cheves employed stern procedures to place the Second Bank on sound footing in early 1819.
- Panic Onset
News arrived in January 1819 that cotton value had broken, dropping 25% in a single day, and the ensuing panic drove the country into recession.
Background and detail
Background. Post-war European readjustments between 1815 and 1818 afflicted Europe with chaos, and the American economy was not immune, contributing to the Panic of 1819. An inflationary bubble grew from 1815 to 1818, obscuring general deflationary trends in world prices. After the failure to recharter the First Bank of the United States in 1811, regulatory influence over state banks ceased. The revived Bank of the United States pursued two objectives: reversing the post-war inflationary practices of state-chartered banks by inducing resumption of convertibility, and expanding opportunities for the common man to acquire bank credit, promoting enterprise and orderly, profitable westward expansion.
Financial Conditions. The Second Bank of the United States was deeply enmeshed in inflationary practices. It sought to compensate for lax regulation by curtailing loans in western branches starting in 1818. By July 1818, demand liabilities exceeded $22.4 million against a $2.4 million specie fund. Public land debt ballooned from $3 million in 1815 to $17 million in 1818, creating unsustainable financial ratios.
Triggering Events. The panic was precipitated by the Second Bank's sharp credit contraction beginning in summer 1818. In August 1818, branch offices rejected state-chartered banknotes. The link between frontier land boom and overseas markets was revealed when Europe recovered from harvest shortages in 1817. Cotton value began to waver in 1818, threatening to burst the speculative bubble.
Bank Stabilization. Despite the Second Bank of the United States' inept management under the Jones-Cheves administrations, it was not the causative agent in the Panic of 1819 or its aftermath. Employing stern procedures, Cheves placed the bank on sound footing in early 1819.
People involved
- William Jones · directed the SBUS branch offices
- Cheves · unresolved identity; named in connection with the Second Bank's administration
Sources
- Panic of 1819 Wikipedia, revision of 2026-07-01
Machine-drafted from the cited Wikipedia passages and checked by a reviewing model, not by a human editor. Every passage cites the revision it was written from; dates and places follow those passages.