This chapter examines the dual monetary system that existed in the hundred years after 1832, a period characterized by basic compromise. The compromise which followed the demise of the Second Bank of the United States had some negative consequences. Recurrently, and reflecting the euphoria stimulated by other causes, banks were created and loans were made with abandon. People then started coming to the banks for their money. These were the panics. The chapter considers the turbulent years after 1832, focusing on the emergence of free banking, the resulting bank failures and greenbacks, agitation for more greenbacks, the pressure for the coinage of cheap silver, and the recurrent panics—all of which combined to make the financial system of the United States, according to Andrew Carnegie, “the worst in the civilized world.” The passage of the National Bank Act (1863) establishing a new system of national banks is also discussed.
Bank Failures, Financial Restrictions, and Aggregate Fluctuations: Canada and the United States, 1870–1913