The Panic of 1837 was a financial crisis caused partially by President Andrew Jackson’s economic policies, even though Jackson was no longer in office when the Panic occurred. It sparked an economic depression that lasted five years, marked by bank failures and extremely high unemployment levels.
The catalyst for the Panic of 1837 was speculative fever. Speculative fever is the rapid buying and selling of property in order to make a profit. Jackson felt that land speculation was getting out of control, and he worried that there was too much paper money in circulation, so he created the Specie Circular. This executive order required that the purchase of public lands be made only in gold or silver. The Specie Circular reduced economic activity and caused a credit crunch. Jackson also refused to renew the charter of the Second Bank of the United States, which meant that government funding was withdrawn. This eventually caused the Second Bank of the United States to go bankrupt. The funding was rerouted to state banks instead.
In addition to Jackson’s hard money policies, English banks stopped putting money into the American economy in order to deal with their own money problems at home. This caused U.S. banks to start calling in client loans because they had overextended themselves while using British funds.
Important banks in New York were running out of hard currency, so they refused to convert paper money into gold or silver, and other financial institutions around the country did the same. Banks stopped making loans, so purchases and civic projects were unfunded. Unemployment skyrocketed, and many Americans went hungry. Paper currency lost its value, and the government did not involve itself in fixing a problem that it had essentially created.