If 1792 was the nation’s first financial panic, the Panic of 1819 is considered America’s first Depression. Before every bust there must be a boom, and in this case it was not equities at the heart of the boom, but real estate. This was largely driven by the America government’s need to pay off the heavy debts it incurred to finance the War of 1812 against Britain. The government raised funds by selling western land grants to settlers, and eventually speculators. Individuals were able to buy land on credit due to earlier legislation, and an influx of state banks were formed to provide cheap credit to those that wanted it.
Eventually a sudden decline for American crops in Europe triggered knock on effects that would tank America’s economy. The impact of the 1819 Panic was severe, and marked America’s first true “depression”. In Virginia, the number of merchant licenses issued between 1818-1819 dropped 40%. In Philadelphia, the number of people employed across 30 industries dropped 78% between 1816-1819:
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