Free The Panic of 1819 by Murray N. Rothbard Page A

article dealing with the Old Northwest overemphasized the traditional sectional and class version of debtors’ relief controversies, in which the West was considered to be almost exclusively in favor of debtors’ relief and the East opposed. Samuel Rezneck, “The Depression of 1819–1822: A Social History,” American Historical Review 49 (October 1933): 28–47; William E. Folz, “The Financial Crisis of 1819–A Study in Post-War Economic Readjustment” (unpublished Ph.D. dissertation, University of Illinois, 1935); Thomas H. Greer, “Economic and Social Effects of the Depression of 1819 in the Old Northwest,” Indiana Magazine of History 49 (September 1948): 227–43.

VII
C ONCLUSION
    Confronted with the nation’s first great panic, Americans searched widely for the causes of and remedies for their plight. Their search led them to a wide variety of suggestions and controversies, many of which showed keen insight and economic sophistication. Discussion was carried on in the newspapers, in monographs, and in the halls of legislatures. Particularly striking is the high caliber economic thinking of the influential journalists of the day and of many leading political figures. The absence of specialized economists was in a way compensated by the economic knowledge and intelligence of the articulate members of the community, including the leading statesmen.
    One of the chief centers of attention was the monetary system. The nation’s monetary system was highly imperfect; banking on a nationwide scale was new, and the nation suffered from inconvertibility and varying rates of depreciation during the War of 1812 and elimination and then renewal of a Bank of the United States. There had always been men who favored inconvertible paper for purposes of national development and men who opposed it, but lately little attention had been paid to such schemes. The panic caused monetary troubles to intensify and take on a new urgency. Groups of monetary expansionists arose, many of them respectable pillars of their communities, who wished to stop contraction of the money supply and expand the circulating medium instead. Various types of plans were developed and advanced, on both a federal and state level. Most discussion was on the state level, where all banks exceptthe Bank of the United States were chartered. The most moderate wished to bolster the failing banks by permitting them to suspend specie payment temporarily while continuing in operation. Others turned to the creation of wholly state owned banks or loan offices to issue inconvertible currency. Many states adopted measures to bolster or expand the money supply, including attempts to outlaw depreciation of bank notes. Four western states—Illinois, Missouri, Kentucky, and Tennessee—went to the length of establishing state owned inconvertible paper. The measures were only adopted after keen controversy.
    Many writers advocated more ambitious schemes of a federal inconvertible paper money. None came to a vote in Congress, but the House asked Secretary of Treasury Crawford to report on the desirability of such a plan. Crawford’s rather reluctant rejection buried the idea. His own paper scheme, though finally rejected by him, drew sharp comment, which incidentally provided some keen analysis of monetary problems and business fluctuations.
    The basic argument of the monetary expansionists was a need to relieve an alleged scarcity of money, thereby eliminating the depression by aiding debtors and raising prices. The more sophisticated inflationists added their contention that the rate of interest depended inversely on the quantity of money, and that expansion would therefore lead to a beneficial lowering of the rate of interest, and hence to restored prosperity.
    The “sound money” opponents of such schemes formed a majority of leading opinion. Their major argument was that depreciation would ensue from any inconvertible paper schemes. But in the process of forming their