This course increased the issue
of the Bank of the United States, and of the local banks which
discounted the paper of the central bank as if it were so much cash. The
local banks, then, whose paper did not widely circulate, exchanged their
bank notes for drafts, thus reducing the amount of circulation of the
first, increasing that of the central bank, and hence that of the total
issue of its bank notes; the local banks continued to exchange their
paper with its narrow and limited circulation for drafts of this latter,
which passed everywhere.
There occurred, then, in 1828 and 1829 an accidental and very brief
scarcity of cash, whose cause we have just indicated; but since the
second half of the year difficulties arising from metallic circulation
had disappeared.
PANIC OF 183l.--The course of business, having scarcely suffered a
stoppage, continued until 1831, and not till then did The Bank, being
the agent of the Treasury and having $11,600,000 on deposit, would have
been forced to become a borrower in order to pay out the $2,700,000
demanded from it. However, its request was granted.
Jackson soon learned with surprise that, business being more impeded
than ever, the President had despatched an agent to England to contract
with the Barings a loan of $6,000,000.
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