This rise in value of the leading staple product of the country had the most important effects politically as well as industrially and financially. It poured a stream of wealth into the cotton States. New cotton lands were opened and cultivated. Slaves, tools, machinery, and all supplies were in great demand, and for the most part, all had to be bought upon credit. Of course the rate of interest was very high, for there was no free capital in the cotton States. The next consequence was a multiplication of banks, either as institutions for drawing the capital from elsewhere, or as paper-money machines under the constant delusion which attends such circumstances. The great commercial and financial centers of the South, New Orleans, Mobile, Savannah, and Charleston, enjoyed a period of unprecedented prosperity.
The effect of the arbitrary redistributions of currency and capital which went on from 1833 to 1837 were to throw the domestic exchanges into the utmost confusion. "Even the monstrous anomaly was presented of bills being sold at a loss in Philadelphia upon New Orleans while at New Orleans bills on Philadelphia were also sold at a loss." The rates of exchange were doubled and the banks made great profits. This was what drew such large amounts of northern and eastern capital into the banks of the Southwest.[1]
The Erie canal had proved a relative success, and had certainly been very useful in opening up access to the western country. It was imitated first in Pennsylvania, then in Maryland, and later in Ohio, Indiana, and Illinois. The southern and southwestern States also adopted plans of internal improvement. For all these things capital was necessary, and capital was just what was wanting. State bonds were issued in order to obtain this capital in the East and in Europe. They met with a sale which was amazing, considering the basis on which they rested. As long as this lasted there was great apparent prosperity in all the improvement States. Wages were raised to such an extent that labor was drawn away from the cultivation of the land. The historian of Illinois says that in 1837 nothing was exported from that State; everything from abroad was paid for by the borrowed money expended in the State.[2]
The residents of the cities shared in this prosperity through the operations of commerce and finance, and the distribution of the new capital to the manufacturing industries. The valuation of real estate advanced in all the cities with great rapidity. The valuation of real and personal estate in New York city and county was, in 1830, $125 millions; in 1836, it was $309 millions. It did not reach $300 millions again until 1851.
The people of the western improvement States had become convinced that without any taxation or other annoyance to themselves they were about to see the land around them very greatly increased in value; and every one was eager to get possession of as much of it as he could possibly acquire. In 1836, owing to the great land and town lot speculation which
