The Panic of 1819
The United States' economy had already gone through a few little hiccups in the decades following the nation's founding, but the Panic of 1819 was the first broad-scale financial crisis Americans would weather.
The United States had been a major exporter of agricultural products and importer of manufactured products before the War of 1812. During the war, imports were greatly diminished and as a result, the manufacturing sector exploded to meet the new demand. This overzealous expansion, coupled with lax banking practices, government overborrowing, returning international competition, a lack of hard currency, increased credit lending, a surging real estate boom and the widespread growth of speculation and development of public land, all helped set the stage for disaster. Sound familiar?
In response, the nation's banks entered a stiff contractionary period, calling in their vast network of loans and setting off shockwaves of bankruptcies and bank runs as people scrambled for cash. Prices of U.S.-made goods crumpled, property values plummeted and unemployment abounded in record numbers.
After a couple of rough years, things finally started to turn around, but as we'll see, the economy wouldn't stay sound for long.