what happened as a result of the Second Bank of the United States not having its charter renewed in 1836???
***was inflation involved???
http://en.wikipedia.org/wiki/Panic_of_1837
The failure to renew the charter of the Second Bank of the United States in 1836 had several consequences, including the involvement of inflation in the economy. Here's how you can understand the impact and the role of inflation:
1. Background: The Second Bank of the United States (BUS) was the central bank of the United States from 1816 to 1836. Its main functions were to regulate the money supply, stabilize prices, and provide a stable banking system.
2. Charter expiration: In 1836, President Andrew Jackson vetoed the rechartering bill for the Second Bank of the United States. Consequently, the bank's charter expired in 1836, and it ceased to operate as the central bank.
3. Impact on the money supply: Without the Second Bank of the United States, the federal government's ability to regulate the money supply was reduced. This led to a more fragmented and less regulated financial system.
4. State and private banks: Following the demise of the Second Bank, state-chartered and privately-owned banks gained prominence, especially in the western and southern states. These banks issued their own paper money, leading to an increase in the total money supply.
5. Inflationary pressures: The increase in the number of banks and the issuance of their own paper money contributed to an expansion of the money supply beyond what was necessary for economic growth. This excessive increase in money often led to inflationary pressures.
6. Speculative lending: With the proliferation of state and private banks, lending standards became less rigorous, leading to increased speculation and risky lending practices. Easy access to credit and expanding money supply fueled economic booms, particularly in land speculation.
7. Bursting of the bubble: The unchecked expansion of credit and speculation eventually led to economic downturns and financial panics. One of the most significant crises was the Panic of 1837, which resulted in a severe economic depression that lasted for several years.
8. Inflationary impact: In the midst of the economic crisis and depression, prices of goods and services generally fell, known as deflation. However, in the longer term, the increased money supply and credit expansion resulted in inflationary pressures that affected prices and the general cost of living.
In summary, the non-renewal of the Second Bank of the United States' charter in 1836 led to an increase in the number of state and private banks, which resulted in an expansion of the money supply and speculative lending. While it initially contributed to deflation and economic crisis, the subsequent increase in money supply and credit expansion eventually led to inflationary pressures.