History of the United States I / Unit 9 USH1 1221 worked example, 60 to 90 seconds
Causes of the Panic of 1819
The idea
Three forces built the bubble together. British textile mills consumed American cotton at high prices, and European reliance on American agricultural commodities drove prices up further. Land speculation drove borrowing, and borrowing drove inflation. Banks lent against land whose price depended on the borrowing, and the Second Bank compounded it by lending freely in exactly the regions where speculation ran hottest.
In practice
A rising market in which the collateral and the credit inflated each other.
Where people slip
Notice that the causes are largely foreign demand. When European agriculture recovered after the Napoleonic Wars, the demand that had supported American prices fell away, and everything built on it fell with it. The first great American depression was made by a boom nobody in America controlled.
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