The Economy After the War of 1812

Before the War- The National Bank Why was the National Bank controversial? Was it effective? James Madison let the charter of the National Bank expire in 1811 As a result- state banks had more gold and silver- “wildcat banks” The value of notes was questionable and counterfeiting was easy!!

After the War- The Second National Bank Congress Creates the Second National Bank of the United States (1816) It was basically the same as Hamilton’s Bank The Purpose: regulate state banks and currency, serve as a foundation for the American Economy

The Economy- Before and During the War Major growth in the manufacturing industry (we need to make our own goods, wartime boom) Shipping industry is hurt by the trade restrictions Easy credit causes westward expansion and land boom, and major inflation!!

After the War- The Economy The new National Bank is created to help finance the government The bank aided the postwar boom by lending money and promoting land speculation The bank then begins to restrict lending, calls in loans, tightens credit, and forecloses mortgages The Panic of 1819 begins and economy starts to collapse Is it the National Bank’s fault?

Actual Note from Second National Bank

Other Economic Questions Should we have a protective tariff? How do we provide manufacturers access to markets? Who should pay for internal improvements?

Tariffs and Transportation Congress protects manufacturing by enacting the Protective Tariff of 1816 The National Road is completed in 1818 and connects the Ohio River to the Potomac River

The National Road Map

Internal Improvements Should the Federal or State Government pay for internal improvements? Why should South Carolina help fund a project that only helps Ohio and Illinois? Pork Barrel spending- does this still happen today John C. Calhoun helps pass a bill in Congress to fund Internal Improvements, but Madison vetoes it- he thinks there needs to be a Constitutional Amendment