May 26, 2001
East Coast investors were quite impressed by the little village of Sheboygan, Wisconsin. If you knew the right people you could buy corner lots way out there for as little as $8,000. Of course the really prime corners might set you back by as much as $15,000. Speculators back east would sell midwestern lands around Chicago, Milwaukee, Sheboygan and Green Bay, to newly-arrived immigrants on credit. Of course they had bought the land from the government for far less (as little as $1.25 an acre) and then greatly inflated the price. The paper money from the speculators was deposited in banks, credited to government accounts, then loaned out a second time, often at largely discounted rates. This left most banks with very few actual assets, especially since what ended up in their hands was usually either promissory notes or some other form of mutually agreed-upon IOU, often called scrip. Individuals could even purchase their daily necessities such as bread, haircuts and whiskey with the smaller scrip. What it boiled down to, was larger and larger numbers of people doing more and more of their transactions in the equivalent of today's supermarket coupons. And a bank vault full of supermarket coupons would very quickly run into trouble.
It was Old Hickory, outgoing U. S. president Andrew Jackson, concerned over the situation, who took action. He ordered U. S. banks to begin accepting only gold and silver for the sale of government lands. But it only made matters worse. Banks tried to build up their supply of solid assets by calling in their loans, only to find there was very little but play money out there for payment. Merchants and speculators began refusing to redeem the scrip they themselves had issued, insisting on hard cash. By 1837 the supply of real money all across the country had shriveled up. 250 New York financial institutions failed in the first three weeks of April. Boston businesses had begun failing back in November of last year; by this May, 68 of them had gone belly up. The real blow came that month, when banks in Boston suspended gold and silver payments. Public construction projects began grinding to a halt, as the financial panic began spreading.
Sheboygan also ground to a screeching halt. Orders stopped coming into the mills. Workers found themselves without incomes; they had nothing to spend in the stores. The mail carrier hanged himself. Those residents who had purchased land outside of the village moved into outlying areas, where they stood a chance of providing for themselves through farming. Many left the area entirely, often tearing down their buildings and moving the materials out to larger towns to the south. Eventually the population was reduced to one, a captain named Thorp. Less than a dozen houses remained to remind him of the glory that was Sheboygan.
Perhaps the experience of many participants in the Panic of 1837 can best be summed up by one crusty pioneer of the Chicago area, who was interviewed some years after the event. Asked how the panic had affected his opinion of Andrew Jackson, he ruefully replied, "I came to Chicago with nothing, failed for $100,000, and could have failed for a million, if he had let the bubble burst in the natural way."
For Classical 91.5 and 90-point-3, this is David Minor
For those interested in the 19th Century explorers, especially of Africa and the Arctic, an excellent read is provided by the paperback _Barrow's Boys: A Stirring Story of Daring, Fortitude and Outright Lunacy_ by Fergus Fleming (New York, Grove Press, 2000, ISBN 0-8021-3794-6).
URL OF THE WEEK
One of the industries hardest hit by the Panic of 1837 was
that of the canal builders. As funds dried up many projects were
put on hold for the decade or so. One such was the Illinois &
Michigan Canal. Construction would not resume until 1853. For
the story of the subsequent history of the I&M, first planned
about 1812, take a look at the Archaeological
Institute of America's article at http://www.archaeology.org/online/features/canal/mansberger.html
in which authors Fkoyd Mansberger and Christopher Stratton detail the discovery and resurrection of seven old canal boats at the canal's Morris Wide Water. Four illustrations accompany the article.
The Game's Afoot ! !
© 2001 David Minor / Eagles Byte