America’s First Economic Boom and Bust

On pages 204-205 of The Mystery of Banking by Murray N. Rothbard, we read:

“Starting in July 1818, the government and the BUS [Bank of the United States] began to see what dire straits they were in; the enormous inflation of money and credit, aggravated by the massive fraud, had put the BUS in danger of going under and illegally failing to maintain specie payments. Over the next year, the BUS began a series of enormous contractions, forced curtailment of loans, contractions of credit in the south and west…. The contraction of money and credit swiftly brought the United States its first widespread economic and financial depression. The first nationwide ‘boom-bust’ cycle had arrived in the United States….

The result of this contraction was a rash of defaults, bankruptcies of business and manufacturers, and a liquidation of unsound investments during the boom.”

This quote is cited from pages 344-345 of The Creature from Jekyll Island, A Second Look at the Federal Reserve by G. Edward Griffin.

Of course, the bust couldn’t have happened without the boom. This is why the expansion of money and credit by the government and the Federal Reserve needs to be strictly limited before bubbles form in the first place.

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