Not only was the country vast in extent, it was rapidly growing. In the decade the nation increased its population by over three million and a quarter inhabitants, an addition which nearly equaled the whole population of any one of the three great sections, the middle states, the south, and the west. As traveler after traveler passed over the routes of his predecessor in this period, reporting the life by the wayside and in the towns, we can almost see American society unfolding with startling rapidity under our gaze; farms become hamlets, hamlets grow into prosperous cities; the Indian and the forests recede; new stretches of wilderness come into view in the farther west, and we see the irresistible tide of settlement flowing towards the solitudes.
Nevertheless, at the opening of our survey the nation was in the gloom of the panic of 1819. This was brought on by the speculative reaction that immediately followed the war, when the long-pent-up crops of cotton found a market at the extraordinary price of nearly thirty cents a pound, and as high as seventy-eight dollars per acre was bid for government land in the offices of the southwest. [Footnote: Annals of Cong., 16 Cong., I Sess., 446.] The policy of the government fostered reckless purchases of public land. In the critical times of the closing years of the war, the treasury agreed to accept the notes of state banks in payment for lands, on condition that these banks should resume specie payment; and then the banks, while taking only nominal steps towards resumption, loaned their paper freely to the settlers and speculators who wished to invest in the public domain.
Under the credit system already mentioned, the pioneer was tempted to exhaust his funds in making his first partial payment, and to rely upon loans from some "wild cat" bank wherewith to complete the purchase of the hundred and sixty acres, the smallest tract offered under the terms of the law; planters, relying equally on the state banks, bought great tracts of land at absurd prices; speculators, tempted by the rapid rise in land values and by the ease of securing loans, purchased large quantities in the hope of selling before it became necessary to complete their payment. On the seaboard, extravagance abounded as a reaction from the economies of war times, imported manufactures found a ready market, and the domestic factories were in distress.
While state banks greatly multiplied and expanded their circulation freely to meet the demands of borrowers, [Footnote: Stunner, Hist, of Banking, I., chaps, iv.-vi.] the United States Bank not only failed to check the movement, but even contributed to it. After a dance of speculation, the bank, in the summer of 1818, was facing ruin, and it took drastic means to save itself. Its measures compelled the state banks to redeem their notes in specie or close their doors. [Footnote: Catterall, Second Bank, chap. iii.; Dewey, Financial Hist, of the U. S., chap, vii.; Babcock, Am. Nationality (Am. Nation. XIII.), chap. xiii.]
By the spring of 1819 the country was in the throes of a panic. State-bank issues were reduced from one hundred million dollars in 1817 to forty-five millions in 1819. Few banks in the south and west were able to redeem their notes in specie before 1822; but they pressed their debtors harshly. Staple productions fell to less than half of their former price; land values declined fifty to seventy per cent.; manufacturers were in distress; laborers were out of work; merchants were ruined. [Footnote: J. Q. Adams, Memoirs, IV., 375; Jefferson, Writings, X., 257; Benton, View, I., 5; Niles' Register, XVI., 114; Hodgson, Travels, II., 128; Sumner, Hist, of Banking, I., chaps, vii., viii.] The conditions are illustrated in the case of Cincinnati. By the foreclosure of mortgages, the national bank came to own a large part of the city-hotels, coffee- houses, warehouses, stables, iron foundries, residences, and vacant lots. "All the flourishing cities of the West," cried Benton, "are mortgaged to this money power. They may be devoured by it at any moment. They are in the jaws of the monster!" Throughout the south and west the bank became familiarly known as The Monster. [Footnote: Catterall, Second Bank, 67.]
Even in the days of its laxity the national bank was obnoxious in many quarters of the country. By the state constitution of 1816 Indiana attempted to prevent the establishment within its limits of any bank not chartered by the state; and Illinois incorporated a similar provision in her constitution of 1818. Between 1817 and 1819 Maryland, Tennessee, Georgia, North Carolina, Kentucky, and Ohio all passed acts taxing the United States Bank. [Footnote: Ibid., 64, 65.] Ohio, defying the decision of the supreme court in The case of McCulloch vs. Maryland, which asserted the constitutionality of the bank and denied to the states the right to tax it, forcibly collected the tax and practically outlawed the bank. [Footnote: See chap. xv., below.]
From the beginning of our history the frontier had been a debtor region, always favorable to an expansion of the currency and to laws to relieve the debtor class. It was but the continuation of an old practice when the western legislature in this time of stringency attempted measures of relief for their citizens. Kentucky's "litter" of forty banks chartered in the session of 1818-1819 had been forced to the wall by the measures of the national bank. After the panic, Kentucky repealed the charters of these banks and incorporated the Bank of the Commonwealth of Kentucky, an institution without stockholders and under officers elected by the legislature and paid by the state. Its notes were assigned to the counties in proportion to the taxable property, to be loaned on mortgage securities to those who needed them "for the purpose of paying his, her, or their just debts," or to purchase products for exportation. The only real capital of the bank was a legislative appropriation of seven thousand dollars to buy the material and plates for printing notes. In short, the treasury of the state was used as a kind of land bank of the sort favored in the colonial days for the relief of the debtors.[Footnote: Cf. Greene, Provincial America Am. Nation, VI., chap. xvii.] The legislature then passed a replevin law giving the debtor a delay of two years to satisfy an execution, in case the creditor refused to accept notes of the Bank of the Commonwealth of Kentucky as payment; otherwise the debtor received an extension of but one year. By another law, land could not be sold under execution to pay a debt unless it brought three-fourths of its value as appraised by a board of neighbors, usually themselves debtors and interested in supporting values.
In 1823 the court of appeals of Kentucky declared the replevin and stay laws unconstitutional. In retaliation the legislature, in December, 1824, repealed the law establishing the court of appeals, and a new court was created favorable to the "relief system." This act the old court also declared unconstitutional, and a contest followed between the "old court" and the "new court" parties, which lasted until 1826, when the "old court," "anti-relief" party was victorious. In the mean time, similar relief measures had been passed in Tennessee, Illinois, Missouri, and other western states.[Footnote: Summer, Hist. of Banking, I., chap. x.; ibid., 122, 146, 157, 161; Durrett, Centenary of Louisville; McMaster, United states, V., 160.]
The distress brought about by the panic of 1819, the popular antagonism to the banks in general, and especially to the Bank of the United States, as "engines of aristocracy," oppressive to the common people, and the general discontent with the established order, had, as we have seen, produced a movement comparable to the populist agitation of our own time.
Upon the general government the first effect of this period of distress was a general reduction of the revenue. Imports fell from about $121,000,000 in 1818 to $87,000,000 in 1819. Customs receipts, Which in 1816 were over $36,000,000, were but $13,000,000 in 1821. Receipts for public lands, which amounted to $3,274,000 in 1819, were but $1,635,000 in 1820. In December, 1819, Crawford, the secretary of the treasury, was obliged to announce a deficit which required either a reduction in expenditures or an increase in revenue. Congress provided for two loans, one of $3,000,000 in 1820, and another of $5,000,000 in 1821. A policy of retrenchment was vigorously instituted, leveled chiefly at the department of war. Internal improvement schemes which had been urged in Congress in 1818 were now temporarily put to rest. With the year 1822, however, conditions brightened, and the treasury began a long term of prosperity. [Footnote: Dewey, Financial Hist. of the U. S., 168.]