Which of the following was a primary cause of the Panic of 1837?
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Correct answer: Over-speculation in western lands and failure of state pet banks
The panic was fueled by a combination of speculative land buying, the collapse of many unregulated state banks (pet banks), and the sudden contraction of credit. When the Specie Circular demanded hard currency, the bubble burst as many banks lacked sufficient gold and silver reserves.
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More Panic of 1837 questions
- President Martin Van Buren’s response to the Panic of 1837 was largely characterized by which philosophy?
- How did the 'Distribution Act' of 1836 contribute to the financial instability leading up to the Panic of 1837?
- Which international factor significantly worsened the American economic crisis in 1837?
- What was the purpose of the Independent Treasury (or 'Sub-Treasury') system proposed by Martin Van Buren?
- The term 'Pet Banks' refers to which of the following during the 1830s?
- What effect did the Panic of 1837 have on the American labor movement?