Martin Van Ruin: Specie Circular

Political Cartoon "The Ghost of Commerce"




Martin Van Buren's presidency was dominated by an economic crisis that known as the Panic of 1837.

It's hard to say if government policy was completely to blame for this economic crisis, but it's fair to say that Martin Van Buren was unjustly blamed for it with his Whig Party critics calling him 'Martin Van Ruin'.

The crisis stemmed from land speculation in taken Indian Lands. If you recall from my posts on Jackson, the Indians by this time were mostly pushed out of the South and East. Jackson's poor Democratic constituents rushed in to purchase cheap land from the government and homestead it.

Speculators got in on the act buying and selling large parcels of this land to resell to people looking to come out and ranch or farm on it. Many of these speculators borrowed from state banks whose paper currency was not backed by specie (gold and silver). This led to massive inflation and a devaluation of paper currency.

In response, Jackson towards the end of his second term issued the Specie Circular act which required that Federal (old Indian) lands be purchased by gold or silver. This essentially froze the credit markets (similar to the credit freeze that escalated the 08' banking crisis, but actually imposed by the government) since the state banks and the borrowers were relying on and trading in drastically inflated paper money they issued.

It's fair to say also that in not renewing the National Bank's charter in his crusade against the bankers and moving the Fed's reserves to state banks, Jackson created the conditions that the state banks could cause this credit bubble.

Van Buren was caught between a rock and a hard place, since he did not want to take responsibility for the crisis himself and did not want to sell out his old friend Jackson. He could have done better in the PR department as he was the first man to really start a political machine, but this was his undoing. The Jackson administration had made so many enemies, the opposition had a very easy time covering the story in their partisan newspapers.

It's the economy stupid. Martin Van Buren was doomed to be a one term president.