The price of
land had for some time advanced tenfold, and the advance in cotton
caused the Southern planters to abandon indigo and rice.
Imports in 1836 exceeded the exports by $50,000,000, which had to be
paid in gold or silver. This outflow of metal created a great void.
The advance in the discount rate in the Bank of England under such
circumstances came like a thunder-clap, and the distended bladder burst.
Banks suspended payment, and bank notes lost from 10 to 20 per cent.
Exchange on France and England rose to 22 per cent., all metal
disappeared from circulation, and a thousand failures took place. The
English export houses lost from L5,000,000 to L6,000,000 sterling;
values fell from maximum to minimum. The losses in America were even
greater; cotton fell to nothing. At the worst of the panic people turned
to the Bank of the United States, and its President, being examined as
to the means of remedying the trouble, stated that it was above all
necessary to maintain the credit of the Bank of England in stead and in
place of private credit, which had disappeared. He proposed to pay
everything in bank paper on Paris, London, and Amsterdam.
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