The economic downturn that began in 1819 represents a significant contraction of the United States economy following the War of 1812. It involved widespread bank failures, falling prices, reduced international trade, and rising unemployment. This financial crisis marked the end of the economic expansion that followed the war and ushered in a period of economic hardship and instability. Land speculation, easy credit from state-chartered banks, and a contractionary monetary policy by the Second Bank of the United States contributed to the crisis.
The significance of this economic crisis lies in its exposure of vulnerabilities within the nascent American financial system and its impact on the political landscape. It fueled resentment towards banks, particularly the Second Bank of the United States, and contributed to debates over economic policy. The crisis also led to increased calls for protectionist measures to shield American industries from foreign competition and highlighted the risks associated with rapid westward expansion and land speculation.
