On May 10 New York City’s banks took a drastic step to protect themselves from their panicked depositors, who for weeks had been withdrawing their funds in coin rather than in the unreliable paper currency. The banks announced that they would temporarily part with no more gold or silver. Other banks around the country followed suit. It could no longer be denied: America’s unstable economic structure had toppled. The crisis came to be called the Panic of 1837, a time when fortunes evaporated overnight, companies crashed by the hundreds, and massive unemployment left the working class bereft. It ended in a severe depression that lasted six years.
A ferment of unfavorable economic conditions brought on the collapse. Throughout the decade states had racked up large debts by building canals and railroads, and an imbalance of foreign trade had drained coin from the country. In 1836 a crop failure cut farmers’ buying power, and a financial crisis in England caused British creditors to call in loans. That summer President Andrew Jackson tried to curtail land speculation by ordering that public lands could be purchased with coin only; banks that financed land speculation suffered. The proportion of paper to coin mushroomed. So did inflation.
But before the disaster struck, investors enjoyed a frenzy of profit making. The diarist George Templeton Strong described their glory and then their fall: “Commerce and speculation here have been spreading of late like a card house, story after story and ramification after ramification, till the building towered up to the sky and people rolled up their eyes in amazement, but at last one corner gave way and every card that dropped brought down a dozen with it, and sic transit gloria mundi! How people have grown rich of late!…I often wondered where all the money had come from and how such a quantity of wealth had found its way into the country. But here’s the result of it.”
•June 24: The United States proclaims its first treaty with an Asian country, Siam.