Maryland almost went bankrupt ~1830s/1840s

[ewmon]

In a time of financial problems for the US, some historical perspective here....

 

[About 1835 or so, financier George Peabody] negotiated an $8 million loan for the near-bankrupt state of Maryland [and refused the $60K commission for doing so]

answers.com

 

I've looked around the Internet, but cannot find any other details. Can anyone shed some light on this near-catastrophe?

[Essay]

One possibility, which was common up and down the East coast, is land exhaustion. Land exhaustion (slash-n-burn, & farm for a few years until yields decrease) and the subsequent land erosion was a big drive pushing the settlement westward. Georgia (and Virginia also) wasn't "the land of red clay," until after the farmers moved through.

 

Combined with "land speculation" and the opening of new territories around that time, it shouldn't be hard to construct a reasonable narrative supporting the ...question. What was the question again?

 

The book "Larding the Lean Earth" describes this general scenario, with examples from South Carolina and New England.

 

Interestingly, the term "progressives" derives from those folks who wanted to abandon the land, and progress westward to take new land (hey, it was free! ...and unoccupied). The "conservatives" wanted to stay in place and work to restore the land. Hmmmmm!

 

~

 

 

[Athena]

What happens before an event is important as the time of the event, so I think we should say, the flood of immigrants was putting the pressure on everything. Which brings us to... From "Pictorial Encyclopedia of American History" 1829 to 1850

 

A spiral of inflation was created by uncontrolled land speculation. Banks issued paper money beyond their resources and loaned it to speculators for the purchase of government land. The land was sold at high profits to private buyers, who borrowed money to pay. The speculators returned the paper money to the banks, which loaned it out again. President Jackson issued a Specie Circular in 1836, previously rejected by Congress, to curb speculation. The Specie Circular decreed that after August 15, 1836, only gold and silver would be taken by the government in payment for land.

 

The Specie Circular explained that one purpose was to protect the public from "alleged frauds". The government had received many complaints of speculators displaying sales maps showing thriving little villages. On buying his plot, the settler would arrive in the "village" and find only a swamp. Another reason was to curb the monopoly of speculators and capitalists and stop the 'ruinous" extension of bank issues and credit.

 

The specie decree reduced public land sales in the West and drained gold and silver in the East as banks now were required to lend money in coin. The Second Bank of the United States closed in 1836 as its charter expired. The former national bank obtained a state charter and became the Bank of United States of Pennsylvania. Congress adopted a Deposit Act directing the designation of one bank in each state to receive government deposits and provide the same services formerly given by the national bank. The act also called for more than $5,0000,000 in surplus revenue to be distributed among the states of the Union.

 

May I point out our coins had value because of the minerals in them. Gold, silver, nickle and copper were used to give our coins value. Canada stopped using these valuable minerals in their coins before the US did so, and therefore, US banks would not accept Canadian coins. Of course now there are no valued minerals in our coins, so their value is completely imaginary. This is not unlike Rome exhausting its supply of gold and cutting its coins with cheaper minerals, and in so doing creating inflation, and then Rome fell.

 

Essay, I do not want to discredit what you said about soil depletion, because commonly economic turmoil is tied to shortages in food supply, which we now know brought down entire civilizations. We should not have a this or that argument, but this and this discussion.

 

These people did not have industry except in the industrialize north and life there was really bad, because of terrible working conditions and terrible housing conditions. Being landless in the south, where jobs were done by slaves, had to suck. The ideal, until rather recently, was to own land, and use that land for all the families needs, and when lucky raise enough plants or animals to sell for everything the family could not produce itself. Now if a person didn't know soil, or wasn't aware of climates needed for farming, or was unaware of problems like tornadoes and flooding, this person could loose everything in a bad land deal. On the other hand, if a person got a homestead in the right place, near a river and forest, s/he had a natural supermarket full of food free for the taking, and timber for housing free for the taking. To insist on running our economy as we did back than is just STUPID.

Edited August 11, 2011 by Athena

[Athena]

Yipes, I goofed and quoted myself instead of editing my post. Oh well, it does need to be said our money situation is nothing like the past. In the past we tied the value of money to gold and silver. Now it is tied to our gross national product. Our gross national product is a count of how many times a dollar changes hands, so if the money stops flowing, our gross national product goes down, and then our credit rating goes up.

 

Because the world traded oil in dollars, all countries wanted dollars and several pegged their currency to the dollar. I don't understand the complexity of all this, but it this gave special importance to the dollar. If the USSR had gotten control of mid east oil, it could have insisted oil be sold in its currency, and that would have taken the advantage from the US and given it to the USSR. We had to take Saddam out, because he began trading oil in Euro's and the Euro was increasing in value. Again if the world began trading oil Euro's instead of dollars, the value of the dollar would have crashed. It is the best interest of some to make keep the Euro weaker than the dollar, but not too weak. I would love to be a fly on the wall, where matters like this are being discussed.

 

I think 9/11 was specifically an attack on the New World Order. What was hit was the Trade Center and Pentagon (military force used to defend the economic interest of the New World Order) and We don't know the third target, but I would guess it would have been related to money. 9/11 is our emergency phone, and I think it was a message of economic emergency. Mid east countries were putting their oil bucks in our banks, which then loaned the money around the world. I think this really pissed off some of smart people in Arab countries off. We were buying their oil very cheap, and banking their money and making a profit on it.

 

I am afraid I am taking this thread off topic, and I am also very sad that so far I haven't found anyone who can discuss this subject, so all our economic discussions, are futile. Whatever, today's world is nothing like the past, except for that speculation buying that leads to disaster. I am afraid school loans will be our next economic disaster as the students will not be getting the jobs they need to pay them off, and their efforts to pay off these loans, will prevent them from buying homes and new cars. Our banking system is a disaster waiting to happen and always has been, but today that could be a worse problem, because the value of the dollar is tied to the world trading oil in dollars and to our gross national product which can crash, and we no longer have the mineral resources that can pull us out of another economic collapse.

Edited August 12, 2011 by Athena

[Essay]

What happens before an event is important as the time of the event, so I think we should say, the flood of immigrants was putting the pressure on everything. Which brings us to... From "Pictorial Encyclopedia of American History" 1829 to 1850

...

Essay, I do not want to discredit what you said about soil depletion, because commonly economic turmoil is tied to shortages in food supply, which we now know brought down entire civilizations. We should not have a this or that argument, but this and this discussion.

...

 

In general that describes things; but for that point in history specifically, land exhaustion was a big factor for several reasons. We still had a fairly young "market" economy back then, where most farming was for subsistence. Growing a bit extra to sell at market, or raising some extra livestock to sell, was a hard job and often did not bring in enough money to be worthwhile. And as the generations multiplied, land was divided so that growing extra for market became more problematic. And the land tended to yield less with each successive year. These pressures led to the development of techniques to fertilize the land and use mechanical advantages over more land; respectively to intensify the yield or profit margin, and to extend the yield or profit margin over a larger area.

 

It wasn't until later, after mid-century when the whaling ships needed a new product to transport, that guano became the big advantage allowing the system to avoid crashing. Well, guano AND lots of new land out west.

 

But without guano, and with new land available a few miles to the west, old exhausted land lost its value...

UNLESS a new commodity could be generated from the land. The 1828 Gold Rush in Georgia spurred a lot of land speculation throughout the 1830, because suddenly lots of old exhausted land potentially had new value. It was land speculation that led President Jackson to issue the Specie Circular (requiring land be purchased with Gold/Silver, instead of bank notes), IN 1836!

 

This is very oversimplified, and I don't know about the specifics of how that affected Maryland, but I bet there is a good story there somewhere!

 

I agree that it is the whole history-- of an accumulation of drunken lurchings from one ecologic/economic bubble to the next --that pushes an empire or nearly bankrupts a state; but whatever drives the history behind the sources of mineral or mechanical or military wealth, it ultimately comes from and depends upon the richness of the land.

 

The fate of one's homeland depends upon the fate of the lands. For our global homeland, we've lost about half of it to erosion so far... and I'm guessing that had already happened in Maryland by the early 1800's.

 

~

[ewmon]

Thank you everyone. This places MD's bankruptcy in perspective.

[Athena]

In general that describes things; but for that point in history specifically, land exhaustion was a big factor for several reasons. We still had a fairly young "market" economy back then, where most farming was for subsistence. Growing a bit extra to sell at market, or raising some extra livestock to sell, was a hard job and often did not bring in enough money to be worthwhile. And as the generations multiplied, land was divided so that growing extra for market became more problematic. And the land tended to yield less with each successive year. These pressures led to the development of techniques to fertilize the land and use mechanical advantages over more land; respectively to intensify the yield or profit margin, and to extend the yield or profit margin over a larger area.

 

It wasn't until later, after mid-century when the whaling ships needed a new product to transport, that guano became the big advantage allowing the system to avoid crashing. Well, guano AND lots of new land out west.

 

But without guano, and with new land available a few miles to the west, old exhausted land lost its value...

UNLESS a new commodity could be generated from the land. The 1828 Gold Rush in Georgia spurred a lot of land speculation throughout the 1830, because suddenly lots of old exhausted land potentially had new value. It was land speculation that led President Jackson to issue the Specie Circular (requiring land be purchased with Gold/Silver, instead of bank notes), IN 1836!

 

This is very oversimplified, and I don't know about the specifics of how that affected Maryland, but I bet there is a good story there somewhere!

 

I agree that it is the whole history-- of an accumulation of drunken lurchings from one ecologic/economic bubble to the next --that pushes an empire or nearly bankrupts a state; but whatever drives the history behind the sources of mineral or mechanical or military wealth, it ultimately comes from and depends upon the richness of the land.

 

The fate of one's homeland depends upon the fate of the lands. For our global homeland, we've lost about half of it to erosion so far... and I'm guessing that had already happened in Maryland by the early 1800's.

 

~

 

I have moved a link about our future food supply to the economics verses reality thread. Perhaps it should go to the link about growth? It kind of blows me away that some people are not making the connection between resources and cost, and the economy. In our future, owning enough land to feed the family maybe as important as it was in the past. The land that goes with our homes is getting smaller and smaller and is far from enough to feed a family.

 

Right now I worry about the cost of land, and the cost of raising cows, which brings us to the cost of milk. I do not know how we can keep milk as affordable as it is, and it has increased by a greater percentage than minimum wage. This means milk will become increasingly difficult for the poor family to buy, and there is no west for future generations to move to.

 

Edited August 13, 2011 by Athena

[bob000555]

There is also the possibility, considering that you can't find a mention anywhere else and that answers.com isn't exactly an academic source, that Maryland was not, in fact, "near bankruptcy."

 

Interestingly, the term "progressives" derives from those folks who wanted to abandon the land, and progress westward to take new land (hey, it was free! ...and unoccupied). The "conservatives" wanted to stay in place and work to restore the land. Hmmmmm!

 

Would you happen to have a citation for that claim? It strikes me as being folk etymology.

 

The word "progressive" was used to mean "characterized by advancement" since c. 1600 and didn't acquire the meaning "characterized by striving for change and innovation, avant-garde, liberal" until 1908.

http://www.etymonline.com/index.php?term=progressive

 

Your case for "conservative" is even weaker. The word " conservatyf" (the old spelling of "conservative") entered the English language in the 14th century and is derived from the French "conservatif." I've personally seen documents using the word to refer to various political philosophies from as early as the 1520's. It acquired its modern meaning from followers of Burke who used it to refer to his philosophy c. 1790. It was used to refer to a British political faction as early as 1830 (and based on documents that I've seen, probably much earlier.)

http://www.etymonline.com/index.php?search=conservative&searchmode=none

 

Please have some respect for facts.

Edited August 13, 2011 by bob000555

[Essay]

Yes, I was just suggesting a "possibility" for the OP's question. I didn't do the research supporting the OP.

===

 

But I did mention a book in my first reply:

 

Larding the Lean Earth, by Steven Stoll

 

http://www.amazon.co...y/dp/0809064316

 

http://www.kirkusrev...the-lean-earth/

"An engaging examination of the early proponents of restorative husbandry--their origins, motivations, and how their ideas played out--from Yale historian Stoll."

 

The "proponents of restorative husbandry," or conservatives, are contrasted with the "progressives" who wanted to "advance" into new lands and discover new resources. I'm not talking about the origin of those words, but just how they were used at that time. I did misuse the word "derive" in that reply, so thanks for catching that.

~

 

p.s. Seen any Perseids tonight?

Edited August 13, 2011 by Essay

[ewmon]

Actually, I had read it somewhere in the distant past about George Peabody assisting Baltimore from bankruptcy, but on the Internet, I only find this claim about Maryland. Many sites can be found by googling "George Peabody" Maryland bankrupt, and in particular, one from Maryland's state archives.

[bob000555]

Actually, I had read it somewhere in the distant past about George Peabody assisting Baltimore from bankruptcy, but on the Internet, I only find this claim about Maryland. Many sites can be found by googling "George Peabody" Maryland bankrupt, and in particular, one from Maryland's state archives.

 

O.k. sorry, then. I suppose saying

I've looked around the Internet, but cannot find any other details.

through me off.

[ewmon]

Well, you're right in a way. I meant originally that I couldn't find why Maryland was headed toward bankruptcy. Now, for example, America has plenty of home foreclosures everywhere, not just in one state. Then again, maybe all the states were close to bankruptcy and Maryland was simply the lemming closest to the cliff.