isa-normaladvance-1913-00247

Description:	THE NORMAL ADVANCE247duce from Avhich their country derives itswealth, they have built up their capital in citiesand toAvns, from Avhich they may, perhaps, de-riA^e the interest of their money, but cannotagain AvithdraAv their funds, at least for a longtime. * * *38An English farmer liAung near Princetonstated the economic and social condition as seenthrough the eyes of an Englishman. He said:Money cannot be gained by cultivation. Thereis no certain good market farm produce may,perhaps, be sold at some price, but you cannotget your money of the cheats and scum of society who live here.39 Both of these men sawthe real cause of the depression of 1819, and allthe Westerners felt it keenly.Economic distress was felt quite generally in1818. Lands had been bought on four yearscredit, so nearly all the purchasers were in debtto their neighbors or to the banks. Indianapassed a laAV in 1818 for the execution of theestates of insolvent debtors. This seemed tobe a fair law, but it naturally Avorked hardships on the debtors, who could get no soundmoney with which to pay their debts. Duringthe seven years folloAving the expiration of thefirst United States Bank in 1811, there Avas aperiod of reckless banking. A great manystate and private banks had sprung up, andthese had quite generally issued seAreral times asmuch paper money as they could redeem.James Flint, a judicious Scotch traveller whospent a part of the year 1819 at Jeffersonville,described the situation of the banks as follows:The total number of these establishments inthe United States, could not, perhaps be accurately stated on any gi\-en day. The enumeration, like the census of population, mightbe effected by the births and deaths. The creation of this vast host of fabricators, and venders of base money, must form a memorableepoch in the history of the country.40 It isbut just to the Farmers and Mechanics Bankof Madison, however, to observe that it faredbetter than the state bank and most privatebanks, for it continued to pay specie until allstate bank paper was refused at the land offices,and even then it continued to favor the farmersof the Jeffersonville land district by redeemingits bills Avhen presented by persons indebted tothe Jeffersonville office.When it was found that more paper moneyhad been issued than could be redeemed, suchmoney depreciated in value. The branches ofthe Second United States Bank which beganoperations in 1817,42 sustained serious losses because of the Avretched condition of the currency.If it accepted paper money at par, for gold,silver or United States bank notes, it could notdispose of such paper at par. The secretary ofthe treasury in 1818 ordered the land office, including that at Jeffersonville and Vincennes, toaccept for lands purchased only money thatwas payable on demand in legal currency ofthe United States Bank.43 The United StatesBank then ordered its cashiers to accept onlyits own notes and specie.44 Since the land officescould accept only United States bank notes andspecie, a great hardship Avas thrust upon thedebtors of the west. Hoav could they pay fortheir farms? Suppose they did raise goodcrops and a large surplus of hogs and cattle,Avhen they sold them (if they could find a market) they Avould be paid in notes issued by stateor private banks. This money would not beacceptable at the land offices in payment fortheir lands. Specie and United States banknotes were so scarce that not enough could bekept in the west to serve the general needs formoney. The debtors Avere really in an aggravating and embarrassing condition. They laidthe blame for this condition on the UnitedStates bank, and in this they were led by thepoliticians, many of whom in Indiana were interested in the branches of the state bank.45 Thegovernor in his message of 1818-1819, in referring to the economic condition, said that inAmer. State Papers. Finance. Ill, P. 735.sow. Fauxs Journal, Nov. 3, 1819, P. 222.10Thwaites, R. G., Early Western Travels, IX, P. 133.^State Papers, Cong. 17, Sess. 1, Vol. 6, Doc. 66, P.8, ff.12The State Constitution of Indiana prohibited that Bankfrom having offices in Indiana.Dewey, Financial Hist, of the V. S., P. 228.Bsarey, Indiana Banking, P. 223.45Esarey, Indiana Banking, P. 229.
Source:	http://indstate.contentdm.oclc.org/cdm/ref/collection/isuarchive/id/34692
Collection:	Indiana State University Archives

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