Welcome to the Missouri Bicentennial Minute from the State Historical Society of Missouri.
The United States was amid the Panic of 1819 at the time of Missouri Statehood. This downturn, considered the first U. S. economic depression, introduced the U. S. into the “boom and bust” cycles experienced by modern economies and it marked the transition of the country toward an economy independent of its colonial ties to Europe. A post-War of 1812 economic boom that fueled overconfidence preceded the downturn.
Causes of the panic included fluctuations in European markets, obstruction by private banks to federal regulations, and failure by lenders and borrowers to realize what made credit expansion possible. Missouri had suffered as a result of rampant speculation in public land. The federal government owned land after the Louisiana Purchase, and intended to expeditiously sell it to settlers and private interests. Land laws allowed credit sales at this time, and speculation ran rampant. This included laying out many towns which never materialized, mostly along major rivers. The overextension nationally resulted in banks calling in loans, and widespread bankruptcy. Both banks in Missouri failed by summer 1821, money became scarce, and businesses failed or contracted.
The immigration fueling development in Missouri ceased by late 1820. Moreover, the Missouri Gazette observed “…the accumulated labor of years is not now sufficient to pay a trifling debt, and property…which … sold for eight to ten thousand dollars…will scarcely…pay a debt of five hundred…” The crop of 1820 provided a surplus for which farmers had no market. Timothy Flint observed, “The difficulty of paying taxes, and finding money for those articles which were originally luxuries, and have come by use to be necessities, is great.”
