company of custodians. All sorts of influences were brought to bear, and all sorts of influences were successful in swelling the number of favored depositories. of issue. Stimulated not a little by such chances of lucrative favors from the government, and given almost a clear field by the destruction of the Bank of the Multiplication of banks United States at a time when enterprise was in all parts of the country assuming a new boldness and adventuring a new magnitude of plan, a passion for the establishment of banks of issue manifested itself everywhere. Charters were granted wholesale by the States, without deliberation or prudence, and without effort to effect any system or exercise any control. Hundreds of banks, with no capital at all, issued their notes as boldly and as freely as the few banks that had real resources and tried to keep a specie reserve. Even while the Bank of the United States continued to exercise a certain presidency and control in such matters, the aggregate circulation of the state banks had been several times greater than its own; and now that the influence and power of the great bank were withdrawn, the volume of bank paper swelled to a portentous bulk. Effect of 46. Inflation (1833-1836). Speculation of every sort, and particularly of every unsound sort, received an immense impetus. Money was abundant and, inasmuch as it did not government represent capital, was easy to obtain. The deposits. Treasury chose its depositories, not where money was needed for legitimate purposes or could be used to the best advantage, but where there were faithful Democratic bankers; and those who received it felt bound to find borrowers who would use it. The paper notes of the local banks were not good to travel with; they rapidly depreciated as they left the neighborhood of the bank of issue. Only a very few banks were either known or trusted throughout any large part of the country; but the issues of every bank could be disposed of, and fatally facilitated the starting of enterprises of all kinds. The distribution of the surplus among the States embarrassed the banks of deposit, because they had to meet Effect of the quarterly payments; but although it ardistribution. bitrarily shifted the locality of speculation, it did not decrease its bulk or seriously diminish its spirit. The States themselves found schemes to put the money into, and that answered the same purpose; enterprise was made the more confident, if anything, and the more universal: the bubble of inflation grew all the bigger and all the thinner. Railroads, too, were now beginning to suggest the rapid extension of the area of enterprise; everywhere the cry was, “Develop the country.” Jackson made trial of the efficacy of a small pill against the earthquake. It had not been his intention Jackson on to clear the field of sound money and make the currency. way for the reign of paper credit. He took occasion to avow his opinion that gold and silver were the true constitutional currency" of the country, and a distinct effort was made by the administration to force the output of the national mints into circulation. The coinage of 1833 amounted to less than four Gold coinage. millions; that of 1834 considerably exceeded seven millions, the increase being almost altogether in the gold coinage; and arrangements were made with the deposit banks that they should issue no notes of less than twenty dollars, at the same time that one-third of their circulation should represent specie. A great many of the States, too, were induced to forbid the issue of notes of the smaller denominations by the state banks. But no small expedients could stay the rising tide of bank circulation, could provide capital to uphold that circulation, or assuage the fever of speculation that had fallen upon the country. lic lands. The circular. 66 The situation, too, as was to have been expected, speedily became perilous for the government. Its revenues were being received in the paper of the banks, which exhibited all varieties and stages of depreciation. Sale of pub- Speculation began to have an extraordinary effect upon the sales of the public lands. In 1834 less than five millions accrued from their sale; but in 1835 more than fourteen millions, and in 1836 nearly twenty-five millions; and these sales of course brought a flood of depreciated paper into the Treasury. Jackson was alarmed, and determined that, so far at any rate as the federal government was concerned, the "true constitutional currency "should be restored. July 11, 1836, accordingly, there issued from the Treasury the celebrated "Specie Circular," which directed that thereafter nothing but specie should be taken by the land agents in payment for public lands. The receipt by the Treasury of any notes but those of specie-paying banks was already prohibited by statute. The President doubtless had good reason to believe that there were no longer any specie-paying banks: he would assure the Treasury of sound money by confining the receipts to gold and silver. This measure, like the removal of the deposits, was his own, taken against the advice of the cabinet and on his own responsibility. Before the full effects of this violent and arbitrary interference with exchanges could make themselves felt, Jackson's second term of office came to an end, and Van Buren succeeded to the presidency. Van Buren was Jackson's own choice Van Buren succeeds Jackson. for the succession; but he came in with a much reduced following, and received from his predecessor a heritage of bad policy which was to overwhelm him. His majority in the electoral college was forty-six, as against Jackson's majority of one hundred and fifty-nine four years before; his popular majority, 25,000, as against a majority of 157,000 for Jackson. He did not lead, or constitute, a party as Jackson did, and he deliberately emphasized his subordination by explicit public pledges that he would in all respects follow carefully in Jackson's footsteps. He thus made himself responsible for all the effects of the specie circular upon the business of the country, and shouldered, besides, the burden of every other mistake that Jackson had made. CHAPTER IV. ADMINISTRATION OF VAN BUREN (1837-1841). 48. Financial Crisis (1837). crisis. THE financial storm had already fairly begun to break upon the country when Van Buren assumed the chief Commercial post of the federal government. Business was already upon the threshold of the crisis of 1837. The volume of paper currency which had gone West for the purchase of lands was thrown back upon the East for redemption, or to add still further to the plethora of circulation already existing there. Credit had received a stunning blow, under which it first staggered, and then fell. There was a sudden rise in prices. There had been a very rapid increase in the amount of imports since 1832, and considerable sums of specie had been sent abroad to meet balances. Flour rose from five dollars (1834) to eleven dollars per barrel (1837); corn from fifty-three cents to one dollar and fifteen cents per bushel. In February and March, 1837, there were bread riots in New York. The banks were everywhere driven to a suspension of specie payments, the deposit banks going down with the rest, in May. On May 15 the President called an extra session of Congress, for the first Monday in September, to consider measures of relief. So far as he himself was concerned, the President evidently did not believe that relief should be sought in Policy of an abandonment of the policy of the specie Van Buren. circular. He himself issued a circular of similar import with regard to the transactions of the |