Why did the 'Specie Circular' lead to a contraction of credit in the U.S. economy?
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Correct answer: It drained specie from eastern banks as buyers moved west to buy land
As buyers needed gold and silver to purchase land in the west, they withdrew it from eastern banks. This drained the reserves of eastern financial institutions, forcing them to reduce their lending and call in existing loans.
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More Panic of 1837 questions
- Which of the following was a political consequence of the Panic of 1837?
- The Locofocos were a faction within the Democratic Party during this era who were known for their:
- Which document is most associated with the start of the financial crisis in May 1837?
- The 'American System' advocated by Henry Clay was designed to prevent crises like the Panic of 1837 by:
- During the mid-1830s, the price of which commodity skyrocketed and then crashed, contributing to the panic?
- What happened to the Independent Treasury Act after the Whigs took power in 1841?