“That Universal Panic Which Now Prevails”: An Analytical Narrative of the Panic of 1791




Miller, Scott C.

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This thesis establishes a baseline narrative for the Panic of 1791, the first financial crisis experienced by the United States as a constituted union. During July, August, and September of 1791, newly formed American financial markets experienced a dramatic bubble in the prices of Bank of the United States (BUS) script and US securities. This bubble was not only the work of elite “moneymen,” but “grocers, shipkeepers, sea captains, and even prentice boys” who were able to mobilize their meager wealth and invest in modern financial instruments for the first time. The subsequent crash, which I argue was caused by a group of elite speculators, saw asset depreciation of well over 50% in a matter of days, and an unprecedented monetary intervention by the Treasury Department led by Alexander Hamilton. Separating it from any previous account of the Panic, this thesis describes a second bubble and crash that shortly followed the first. By examining the economic, political, and social dynamics that comprised the Panic of 1791, as well as the Hamilton Treasury’s policy response, this thesis sheds new light on the origins of US government financial crisis management as well as the delicate interplay between the new and untrusted American government and Hamilton’s novel financial system. Data drawn from a wide variety of historical material, including newspaper coverage, correspondence, financial databases, and personal records demonstrates the modernity of the Panic of 1791. The credit networks, financial instruments, speculative tactics, and governmental policy tools would be widely recognizable to modern financiers. This thesis challenges the historical assumption that the Panic of 1791 was a minor historical event of limited consequence. Contrary to the conclusions of an extensive historiography, the Panic of 1791 was a dynamic economic, political, and societal phenomenon with a broad impact on both the founding era and the course of American financial and economic development. By formulating a limited but energetic response, Hamilton prevented the Panic from becoming a full-blown economic, and possibly political and constitutional, crisis.



Early republic, Speculation, Financial panic, Bank of the United States, Economic history, Alexander Hamilton