Here is a perfect example of inflation cause by debt and the following deflation cause by the removal of debt.
Panic of 1819
The Panic of 1819 and the accompanying Banking Crisis of 1819 were economic crises in the United States of America principally caused by the end of years of warfare between France and Great Britain.
These two nations had been at war with each other since the 1680s. They finally settled their differences in 1815. While these two nations had warred with each other, the United States had prospered. These European nations needed American industrial and agricultural products to sustain themselves during the conflict. Once the war ended, American products were no longer in such great demand. Both the French and the British downsized their respective militaries. Many of these former soldiers returned home and assumed their peacetime occupations, cutting into the need for American items overseas.
During the various British-French conflicts, United States goods, especially agricultural products, were in high demand in Europe, Americans had purchased Western land at an extravagant rate. In 1815, Americans purchased roughly one million acres of land from the federal government. In 1819, the amount of land had skyrocketed to 3.5 million acres. Many Americans could not afford to purchase the land outright. The federal government did allow Americans to buy the land on credit. As the economy ground to a halt in 1819, many Americans did not have the money to pay off their loans. The Bank of the United States, as well as state and private banks, began recalling loans, demanding immediate payment. The banks’ actions resulted in the Banking Crisis of 1819 and helped lead to the Panic of 1819. The federal government tried to alleviate some of the suffering with the Land Act of 1820 and the Relief Act of 1821, but many farmers, Ohioans included, lost everything.
As a result of the Bank of the United States’ actions, money became scarce, making it even more difficult for people to pay their debts. Several states, including Maryland and Ohio, implemented taxes on the Bank of the United States. These states hoped that, by taxing the banks, money would then enter the grasp of state governments. The state governments could then make loans to their citizens, thus relieving the money shortage.
In today’s case, the recalling the loans are caused by resets. As the same principle is applied, the same outcome is returned. Credit and/or Money shortage. Another example of fractional reserve banking gone unchecked by the Govt’ and Bankers.
Land Act of 1820 and the Reflief Act of 1821:
Congress responded to the farmers’ concerns with the Land Act of 1820 and the Relief Act of 1821. The Land Act reduced the number of acres that Ohioans had to purchase from 160 to eighty and the cost from $2.00 per acre to $1.25 per acre, in an attempt to encourage additional land sales. The Relief Act permitted Ohioans to return land that they could not pay for back to the government, granting a credit towards their debt for the returned land. Additionally, Congress extended credit to the buyer for eight more years. The government hoped that with the time extension, the economy would improve. Farmers would then be able to sell their crops and make payments on their loans. By allowing the return of land that Ohioans could not afford, Congress helped farmers not lose everything that they had worked for. People could often afford a smaller acreage, but not the 160 acres originally mandated by the Land Act of 1804. Overall, the federal government’s policies were successful, and many Ohioans were pleased that Congress had taken action to help them.
Let’s see, land values decreased by 38% and extention of loans for 8 more years…
I’m supprised Congress hasn’t thought of this…
That’s right: they make history, they don’t read it.
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