The United states Government had borrowed heavily…
January 1819 CE
The United states Government had borrowed heavily to finance the War of 1812, causing tremendous strain on the banks’ reserves of specie and leading to a suspension of specie payments in 1814, and then again during the recession of 1819-1821, violating contractual rights of depositors.
The suspension of the obligation to redeem greatly spurs the establishment of new banks and the expansion of bank note issues, and this inflation of money encourages unsustainable investments to take place.
Under the management of the first president, William Jones, the Second Bank of the United States has failed to control paper money issued from its branch banks in the West and South, its inflationary lending policies contributing to the post-war speculative land boom.
It soon becomes clear the monetary situation is threatening, and the Second Bank of the United States is forced to call a halt to its expansion and launch a painful process of contraction.
There is a wave of bankruptcies, bank failures, and bank runs; prices drop and wide-scale urban unemployment begins.
By 1819, land measures in the U.S. had also reached three and a half million acres (fourteen thousand square kilometers), and many Americans do not have enough money to pay off their loans.
Resigning in January 1819, Jones is replaced by Langdon Cheves, who continues the contraction in credit in an effort to stop inflation and stabilize the Bank, even as the economy begins to correct.