 The panic in 1819 was America's first great economic crisis in depression. For the first time in American history, there was a crisis of nationwide scope that could not simply and directly be attributed to specific dislocations and restrictions, such as like famine or wartime blockades. Confronted with a new, vital phenomenon, Americans looked for remedies and for understandings of the causes, the better to apply the remedies. This epoch of American history is a relatively neglected one, and a study of the search for remedies present, an instructive picture of a people coming to grips with the problems of a business depression, problems which, in modified forms, were plagued to Americans until the present day. Those are the words of Murray Rothbard from his dissertation on the Panic of 1819. And we are going to end up diving deeply into the issues involving the second bank of the United States and this economic panic. But before that, we now have a new president here in American history. We have the Monroe administration and to dive into this new period in the greater depths. We are joined once again by Dr. Patrick Newman on Liberty versus Power. Patrick, can you introduce us to James Monroe? He's a character that's a little bit, has been on the margins of our story to this point. He's a negotiator of the now infamous Louisiana Purchase. Before we begin and kind of diving deeper into some of the consequences of this administration, can you let our viewers and our listeners know a little bit more about James Monroe, the man? Sure. So James Monroe is a very interesting character because he started off his career as a noted Virginia anti-Federalist allied with Patrick Henry. Murray Rothbard discusses him in his fifth volume of Conceived in Liberty during the Virginia ratification debates and some of the politics surrounding that. So he started off as a Virginia anti-Federalist. But as time went on by the Jefferson administration, he becomes more and more nationalist. He becomes more and more influenced by Madison. And then he becomes Madison's secretary of state. And by this point in time, he's sort of an establishment Republican, so to speak. So he's a classic moderate Republican during the Madison administration. And then later on becomes really one of the preeminent nationalist Republicans. So these are the big government Republicans. They're very similar to the federalists in policy, but they wanted to be in control of things instead of the federalists. So Madison, excuse me, Monroe is in charge of the country now. This is the so-called era of good feelings. It's really more accurately described as an era of corruption because the national Republicans are in total control, and they're using this time to sort of continue to fasten various crony special privileges onto the American economy. So Monroe is kind of in charge of this. He's not necessarily a major player, but he is a president sympathetic to central banking, tariffs, internal improvements, foreign interventions, and so on. So in many cases, unfortunately, he starts off as someone who is ready to reform the system. He's fighting the Constitution. He supports states' rights and small government. But given enough time in the swamp, so to speak, he soon becomes just a standard Madison disciple, so to speak. So this is a, yeah. And of course, during this time, it's not as if you're going to have some sort of trailblazing outsider coming in and changing up the political dynamic of the party, and there's still a deeply controlled system for electing presidents that the Federalist Party has wounded for all the reasons involved in the War of 1812 and other problems that we've talked about in the past. You weren't going to get some sort of reformist. You were going to get a continuation of this Virginia dynasty, which have now controlled American politics for a very long time at this point. Yeah, exactly. And you're starting to see a familiar pattern. This is something a lot of people might not understand now, given current politics. But back then, it was becoming abundantly clear, and we'll see how this plays a role in the notorious election of 1824 and sort of a corrupt bargain of 1825. The Secretary of State position is seen as a reliable stepping stone into the presidency. So at this point with Monroe, you've had Presidents Washington, Adams, Jefferson, Madison and Monroe. So you're seeing a precedent where Jefferson was Secretary of State. He then became President Madison was Secretary of State. He then became President Monroe was Secretary of State. He became President. Seemed as though being Secretary of State would get you into that coveted presidential job. And Monroe was no different in this regard, as we spoke about earlier. In the last episode, he had beaten William Crawford sort of in the Republican caucus. William Crawford had decided to run, then he didn't and so on. And this was kind of the old Republicans last hope to try and have some sort of good President during this time period. But instead you have Monroe and you also have his Vice President, Daniel Tompkins of New York, who was really notable for just being an alcoholic at this time period. So it wasn't really up to much. But anyway, so you've got the Monroe administration and far from it being, as I mentioned, an era of good feelings. This is usually the term, most traditional American histories, how they describe this era because they say, well, it was only one party. The Federalists were gone. You just said the National Republicans. In fact, it was really an era of bad feelings. There's a lot of acrimony. There's a lot of bitterness, fighting. But more prominently from the perspective of our podcast, it was an era of intense cronyism. An era of intense corruption and monetary cronyism really stood at the forefront. That's one of the things I love about the narrative of your book is this period in particular when you flip sort of this narrative on the head because, again, like that, that is the textbook era of good feelings sort of selling point of this period. And then it's interesting because I think about it now. I presume this has a lot to do with just kind of perception that we have transcended party politics, the benefits of the uniparty, nothing helps really ingrain a propaganda narrative quite like a single party controlling all aspects of government at this point. But there seems to be this built in longing within kind of American discourse of imagine how much better off we would be if only we didn't have this petty politics infighting and things like that where, no, it's precisely this period of time where you very much have such some of those vulgar examples, I think of cronyism, we're going to dive into a particular second, making the United States, which justifies all of the cartoonish depictions of it as this great monster. But not to put you too much on the spot, but how far back has this portrayal of this period as an era of good feelings been baked into the American history? Was that a kind of a byproduct of the newspapers back in the day presenting it? Or is this more of a modern construction of it in many ways? It's kind of a modern construction. There was a famous book, I believe the name is by George Dangerfield. I want to say about this spoke about this period. And a lot of it is a sort of a standard account of the period. A lot of it is a way it's just taught in American history classes where you got to have something bridging the War of 1812 and Andrew Jackson. So you got this period in this one party and it's easy for people to understand because we've told people that you've got these two parties and they've always been fighting and now that you have this one party. Well, it's got to be clearly you got this harmony and well now we're finally done with this political infighting and all this stuff. And a lot of people think that you can have government without politics, government without this partisan bickering when it's really built into the sea, into the very roots of the government structure, as we've described so many times before. And it is something that I think doesn't really get properly appreciated because I if someone were to ask me what's my favorite part in this book, we've got five parts, I'd probably actually say the era of corruption. Just because I find it so interesting, it's so neglected and there's just so much stuff going on. A lot of times it's just you just skim through it in traditional histories. It's like, all right, well, you need something to bridge between Jefferson and Jackson and OK, maybe there was this crisis over slavery regarding the Missouri crisis and the compromise. And all right, then there's that. And then we get to the election of 1828 in Jackson and then blah, blah, blah, blah, and then we're off to the races doing that. I think this this period is a fascinating era because you see a transition not only in terms of just the political battles, but also in terms of the individuals, the heroes and the villains, so to speak, the old characters kind of fade out of the scene. Jefferson's getting old. You know, he dies in 1826. The you start to see some of these new people that we have mentioned guys like Andrew Jackson, Martin Van Buren, various individuals associated with the National Republicans, Henry Clay, Daniel Webster. And these are the characters that will sort of define the leading debates regarding cronyism in the 1820s, 1830s, 1840s. And then until the 1850s, when then you see sort of a new cast of characters sort of take take hold in American history. And so I always find this era of corruption absolutely fascinating. I think it's just totally misunderstood. I think a big reason for that is that most histories do not concentrate on the panic of 1819, as you've mentioned, using the quote from Murray Rothbard. It's that episode is a really defining event in American history, and it's something that a lot of people don't understand or properly appreciate. It's also classic Rothbard that, you know, his PhD dissertation is on the panic of 1819. And he writes on the definitive history, you know, kind of touching on an overlooked period of time that is, you know, a really a lot of relevance within kind of just how the financial system is shaping there on after and that his work, Dr. Jonathan Newman highlighted a few years ago how the Federal Reserve itself was literally just plagiarizing from Murray's analysis on this period without giving him credits. That's one of the big victories for the other Dr. Newman. But it just is a classic Murray that this is this is what he's writing his PhD on back in the day. And it just it seems to be such a perfect sort of core of so much of Rothbardian themes throughout the rest of his career. Yeah, absolutely. And this panic, this is his dissertation, the panic of 1819. I've been on some standard history podcasts, notably the age of Jackson to actually talk about Rothbard's dissertation because it is something that is still cited because it's one of the authoritative discussions of the panic of 1819. There's been a new book that came out about a couple of years ago by Andrew Browning, I think, on the panic of 1819, which, you know, probably in the way the historical literature goes, we'll slowly supersede, you know, in terms of the citation battle. But in a lot of standard histories, when there's some discussion of the panic of 1819, they would actually give lip service to Rothbard. You couldn't say the same thing for America's Great Depression or man economy and state, et cetera. But this was a this is a dissertation that provided a lot of value to the historical community, just in terms of an immense amount of information. I also do find it funny. I remember when Jonathan had pointed out that the Federal Reserve was maybe not doing the scholarly thing with Rothbard's dissertation, taking the scholarly path and instead just sort of plagiarizing from it. Well, the whole reason Rothbard's PhD got delayed was because Arthur Burns was in a big fight with Rothbard's dissertation advisor, Joseph Dorfman, over the evolution of the project, and it was only when Burns left to become to join Eisenhower's Council of Economic Advisers. And then later, the Federal Reserve that Rothbard is able to get his PhD. So in this case, the Federal Reserve is just it's just not giving Rothbard any credit. There's just multiple issues there. But it really is an important defining element of American history because it's a great instance of cronyism and it also kind of reignites. It puts the fire under the bellies of a lot of the people who would become major reformers in the Jacksonian era. When it seems like after the War of 1812, the old Republican coalition was dead. The National Republicans had taken control and it seemed as though everything was going to be the gate was open, they'd be able to do whatever they wanted. But the panic of 1819 came and it really kind of put a through a big monkey wrench into all of their plans. Before we go and really start diving in deeper into the second bank of the United States and, you know, more about the panic. You know, I want to take a little bit of time to focus on one of the individuals you mentioned previously, which is Henry Clay, one of those future Secretary of States, because he's one of those figures that that really is one of the iconic National Republicans, you know, the man most credited with the American system, which is going to take up a great deal of the next few episodes. You know, Clay, I think he's one of those characters that historians love, right? I mean, he's a very flamboyant personality, you know, very much in contrast to like the very boring John Quincy Adams and others time, you know, he is, you know, we look at this generation, the kind of second class of American statesmen, right? You know, we were moving away from sort of the literary period to the great orator to the great performers in the legislature. And Clay, who I'm one of his big early breaks, he's one of the lawyers, actually, of during the treason trial for Aaron Burr back in the day. But can you just touch a little bit about, you know, Henry Clay, how he gets to this part of prominence and in also some of his kind of business dealings. I know Dr. DeLorenzo within Hamilton's Curse. You know, you got to renamed it Clay's Curse for the degree that which he highlights some of the his own cronyism involved in all this sort of stuff. But I know he's going to be a figure that's going to come up a lot when it comes to the defense and the promotion of the Second Bank of the United States before we go deeper into those those kind of historical issues, kind of expand more on the person. Henry Clay, who is now Speaker of the House, if I believe if I understand correctly during during this time, right? Yeah, so Henry Clay is a noted Speaker of the House. He's one of those politicians who a lot of people would say he was sort of, I guess, the the Buffalo Bills where they would run, they went to the Super Bowl four times in a row and they never got a Super Bowl champion. Henry Clay was a perennial runner for the president. The presidency, he got the nomination a couple of times, but he just never was able to get the top prize. So it's one of those politicians alongside John Sherman in the late 1800s, who a lot of people thought if they had to bet money, that he would have gotten the presidency at one point, but he never did. And that was something that always tormented him. And Clay, as you've mentioned, is in many ways kind of a bridge between, say, a Hamilton, the Hamiltonian cronyism, the Hamiltonian system and the Lincoln, Lincolnian cronyism, I guess is the way the way you'd put it. Clay is is that individual from the 1820s to the early 1850s. Then in many ways embodies that big government central banking protective tariffs, foreign intervention on certain aspects and pro-public works and internal improvements. So he's kind of that bridge between Hamilton and Lincoln. And Clay himself, he was, you look at his family background. He had, you know, I believe he married the daughter of a wealthy Kentucky businessman. He himself was involved in hemp production, which of course might seem a little hypocritical, given that he was not hypocritical, just a little a little blatant cronyism, given that he was always promoting protective tariffs, including on hemp to block Russian hemp. He was a very big proponent of central banking and he got money through the central bank, the second bank of the United States. So he was someone who was willing to advocate government intervention. But of course, he wanted a little cut of the pie for himself. And so Clay emerges as a big figure during this time period, someone who would contest with individuals such as Andrew Jackson, Martin Van Buren, and even Thomas Hart Betten, a relatively neglected individual from Missouri, who we hopefully will get into. We'll talk about this time period. But Clay is a fascinating character and he is one of the defining cronies of this era. And it's interesting that if I recall correctly, he was never a federalist, right? I mean, which again, just shows the degree to which the Republican term didn't mean anything. But here you have the man who perhaps more than anyone else continued the Hamiltonian line within the legislature and not necessarily the court system, which, you know, and all this sort of stuff. But within the legislature, you know, perhaps the great air of Hamiltonian thought was a lifelong Republican, at least the name only, right? Yeah, absolutely. So when you're looking at the. Yeah, when you're looking at the people in the 1820s, many of them, they had sort of cut their teeth in the political realm in the 1800s, 1810s, and they had sort of grown up thinking that Republican idea, you know, the Republican ideology was maybe something closer to the moderate Republicans. So Clay had grown up as a Republican. He was not a federalist. He had initially actually fought central banking, at least he fought the renewal of the the recharter for the first bank of the United States, not out of any ideological principle, but because he had owned stock in various banks that wanted to get some of that bank's deposit. So he wasn't against central banking. He just wanted to benefit his own banking interests, make sure that the banks that he had owned stock in would receive some of the government subsidy of the government deposits at the first bank of the United States and so on. But he is really, that's a good point. You I'm glad you brought this up because it just shows you how much the Republican Party had changed since the 1790s and how Clay was able to facilitate his cronyism through the Republican Party, you know, using that Republican Party mantle. And Clay in many ways is ultimately why that Republican Party disintegrated in that it no longer became a major political party. It had become totally unidentifiable with the original Jeffersonian Republican Party. OK, well, if we're going to get into the panic of 1819, we must kind of get used to the second bank of the United States back bigger than ever. We touched a little bit on the power brokers on the last episode, you know, but of the founders, you have Stephen Gerard and John Jacob Astor, who is the richest man in the United States, I believe at this point, from right off the back, there is a major sort of scandal brewing with the who actually owns stock and shares of this bank. You know, so right from the get go, you have people breaking the legal statutes on how much individual actors can actually control this new institution put in place during the at the end of the Madison era. Can you touch on the sort of the the the aspects of the origins of this bank, which really kind of start highlighting kind of the really vulgar, corruptive aspects of this institution can get right baked right into its bones from the very beginning. Yeah, so as we mentioned earlier, John Jacob Astor and Gerard, they were very big in pushing for the bank during the War of 1812 and then after in the last basically 1816 the end of the Madison administration. Why? Well, because they had bought a tremendous amount of government debt. This was debt that they bought at depreciated rates. It was very risky. And they wanted to increase the value of the debt. And one way to do that would be to create a central bank and whose stock could be purchased with government debt. So this increased the demand for government debt, increasing the price and would make it a less risky investment in what actually allow Astor and Gerard to receive quite a handsome return on their investment. This is very similar to the debt speculators at the beginning of the country's founding. And it's very similar with the beginning of the the first bank of the United States under Alexander Hamilton. So they try during the War of 1812 they fail. They try again after the War of 1812 they succeed. And both of these individuals they're very excited about using this bank, right? And they think the profits are going to be immense. But what often happens in American history is you have competing power groups. So competing groups of elites in their sort of wrangling for control of the appropriate machinery. And sometimes one group can kick out another group and so on. And so while they still did benefit from the increase in the price of the debt, they weren't able to really exercise control in their institution. Because for lack of a better term, swashbucklers from Baltimore more or less wrestled control in these guys. They were just kind of looking to loot the bank for their own benefit and just engage in sort of fraud and illegal actions and stuff that's cronyism. It's not just necessarily just cronyism from government intervention. It's just blatantly breaking the law and things of that nature. So what happens is the government appoints its various directors. It is able to appoint, because it owns one-fifth of the bank. It's able to appoint one-fifth of the directors. But then there has to be some sort of decision on the bank's president. So the bank's regional branches, they had presidents. But the main branch, okay, what's going to be the, who's going to be running the show in Philadelphia? And what happens is Baltimore financiers are able to wrestle away control from Aster and Gerard because they're using proxies. So sometimes various government regulations, the people writing these laws recognize that elites might try to dominate an institution. So they think they can prevent this by putting in safeguards, limiting the amount of ownership an individual can control, or the amount of voting power an individual can control regardless of their ownership. And this is supposed to make the process more democratic. Well, one easy way of getting around this is you use proxies. So various people, I think there was an example. The name was George Williams, I want to say. And he was a lawyer and he literally had like, using his clients and he was able to vote under his client's names. And it was basically just proxies that he was able to amass an absurd amount of voting power. And it was through this that the Baltimore financiers were able, basically able to elect, I think a former secretary of the Navy, just sort of a bumbling William Jones to the presidency. And this guy, Aster and Gerard weren't a fan of, because they realized he would basically be susceptible to Baltimore financiers, right? And so through this, you then start to see during this period after the War of 1812, the boom years of the panic of 1819, individuals associated with the Baltimore branch really do abuse the public's trust. They're lending money to themselves illegally without getting approval from the main board. They're using bribe money to pay people off, including the President William Jones and so on. And it's just really kind of this ugly scandal where you see how, all right, you get this government institution, the government says, yes, this central bank will promote the public welfare and all of this. And then like right from the get go, various cronies are taking control and then they're able to just basically loot it for their own gain. And it really just kind of casts a really bad perspective on government-run enterprises. There's several sort of kind of figures going on here. It's interesting the degree to which a lot of this, the problems with the Bank of the United States, a lot of these were regional, and again, particularly with the dealings on within Baltimore itself. And you had people like James Buchanan, who I don't believe was the president, right? No, no, no, no, no, yeah. Samuel Smith, who I believe was a senator at the time, you mentioned Williams. Literally, again, making loans to friends without even recording it, I mean, it was just some of the most blatant vulgar corruption that goes on. And of course, one of the people, one of the masterminds behind it is, it was first at McCullough. Yeah, James. James McCullough, who, we're going to get into the importance of Supreme Court battles over this in the 1819. But again, it's just a fascinating degree to which can ramp it, unstopped corruption within this bank. And the amount of consolidation here, you mentioned 15 individuals controlled 75% of all the Baltimore banks this time. And this was a time where we saw also, in part because we have gotten rid of species requirements right on banking policies in the United States, following the end of the Maddison administration. This is also a period where we're seeing an expansion of bank branches around the country, which is having a massive increase in just kind of banknotes and fiduciary media out there in the economy. Can you talk a little bit about this aspect of where the economy is right now beyond the structural issues of this new national bank? What is the landscape of the larger banking environment in the United States? Yes, that's a great question. So after the War of 1812, or during the War of 1812, there was a suspension of species payments. Banks and the government, for its treasury notes, they were not redeeming them in specie. And after the War, various people, many politicians, wanted to return to the gold standard, etc., boost American credit abroad, and so on. In order to return to the gold standard, you would have to either, unless you wanted to basically reduce the value of the dollar abroad, or reduce how much it was worth in terms of dollars, you had to either let the country grow up to its money supply by increasing the supply of goods, and that would slowly lower prices, or you would contract currency, and this would lower prices, and it would make it feasible for banks to return to the gold standard. So the contraction of the currency was proposed by old Republicans at this time period, but the national Republicans wanted to have their cake and eat it too. They wanted to basically say, okay, let's have banks resume species payments, but instead of them being forced to contract, we will have the second bank of the United States lend them money to help them do this. This was really just kind of pushing the problem, just kind of shifting the burden around, because what this was doing was, instead of causing species to leave the banks, it would cause species to leave the second bank of the United States. This is talk about sort of approximate cause of the panic of 1819, but it was really just, it was similar to the 1920s, if you've read Rothbard's America's Great Depression, when Great Britain is trying to return to the gold standard, but at the same time, instead of engaging in contractionary monetary policy, it's engaging in expansionary monetary policy. These are mutually contradictory. You can't get both. You can't have your cake and eat it too, but various politicians, they thought they could get away with this. So the monetary system at this time period is sort of in shambles. It's not really a hard money system. There's been this great proliferation of banks during the war, and many politicians are eager to return to species payments, but they don't want to have to make the necessary sacrifices in order to do so. And at the same time, we have land, we've got so much land out there, the governments using that, we're still recovering from the old Yazoo scandal. Can you talk a little bit about government's treatment of land at this time as well, playing a role in terms of lowering interest rates, and its role in expanding sort of the credit during this era? Yeah, absolutely. So on top of having the banking system expanding credit, and this is lowering interest rates, it's encouraging businesses to take out loans for various projects like farm improvement, steamship building, and so on, various higher order goods that an Austrian business cycle theory would argue is what would be stimulated during an inflationary bubble. You also had the government that was providing land to settlers on credit. So there's this big issue, you know, since the 1790s, the forces of small government wanted cheap land that would be available only to homesteaders, so for homesteaders to actually acquire the land from the government for very low price or free. Again, this is normal, the government doesn't, this is a good thing. The government really doesn't own the land, it's just kind of claiming ownership and these land prices, they're sort of taxes on settlers that they have to pay in order to claim ownership of something that they themselves homesteaded. So the government compromised during about like 20 years ago, the late 1790s, early 1800s, and it said, okay, well we won't lower land prices, but we will, we won't lower them that much, but we will allow settlers to obtain land on credit. Okay, so the government's not necessarily engaging in credit expansion, but it's just collecting, racking up, you know, it's keeping like a balance sheet of the various people who are bar, you are borrowing from them. So if you want to buy X amount of acres, then the government is going to say, okay, you owe us this amount in the future. And so as the years went on, more and more settlers started to rack up debt, especially after the War of 1812, when you just started to see a lot of people move out west. So similar to the housing crisis of about 15 years ago, not only was the Federal Reserve, not only was the second bank of the United States pumping in new money into the economy, the federal government was also incentivizing settlers to become highly indebted, basically because they wanted to try and have their cake and eat it too, get more people to settle out west without actually having to lower land prices. And this turned out to be a very big issue because settlers were racking up a tremendous amount of debt, debt that they might not be able to pay back. So we have low interest rates we've got, people buying stuff they can't afford, everything's going crazy. And as you mentioned earlier, now you have the hard money of gold leaving the second bank of the United States, which causes them to have to start to reverse policies. And we have a contraction now going on as the second bank of the United States is now calling in loans and trying to bring things back in. One of the things I think is interesting with when you kind of illustrate this period is that in spite of this being a financial contraction, in spite of this creating issues within bank notes and within the financial sector, during this period, real economic activity kind of keeps going on in spite of the turbulence in the financial sector. So can you talk a little bit about that aspect of it? You mentioned there's no bank rents going on, there's not a major stock market crash. What is it that people felt in the period during the reversal of these incredible expansionist policies, the reversal of that? Yeah, so what they were mainly seeing is, and they were mainly experiencing was a decline in nominal value. So a decline in prices of goods they were selling, so crops and other maybe various manufactured goods, a decline in wages, a decline in some stock prices, a decline in the value of their land, et cetera. And at the time, because economic data was not easy to come by, and many people were sort of focusing on what was happening in their local economy or their specific region of the United States, they didn't realize that it, that's all it was, or for the most part, it wasn't a decline in real values, a decline in real output, it was only just a decline in nominal values, okay, so just prices. So businesses might be earning less money, but they weren't really taking into account that they were paying less in costs, right? Workers might be earning less in wages, but they didn't really realize that the prices of goods that they were buying had also fallen. So if your nominal income falls by 10% but prices of goods fall by let's say 8%, then instead of having a 10% cut in your standard of living, it's actually about a 2% cut, which is still serious, but it's not nearly as bad as a 10% cut, right? So during this time period, when you actually look at the economic data that we have in terms of overall production and output, etc., the actual panic of 1819 wasn't that serious, it was a little bit of a downturn in 1819, 1820, but beyond then, beyond that, the economy was growing vigorously, the fallen prices was matched by a fall in costs and so on, so real income was back up, etc. You look at GDP per capita statistics, so GDP per person, those were growing in the 1820s and so on, but what's important from the perspective of my book, and just the consequences of the panic of 1819 was that people thought they were getting poor. So this led to a lot of issues. It led to various problems. There was a great amount of indebtedness and of course bankruptcies. People are concentrating on those bankruptcies, not realizing that resources are getting reallocated and they're being used elsewhere in the economy, and so on. So this is a classic example of how a lot of economists argue that business cycles in the 1800s were very severe, but when you look at the data, they actually weren't and this is because people confused, both past and present, they confused falling prices with falling real incomes when that's not necessarily the case. And so at this time, so we have the psychological loss of this financial crisis and then it's about the same period where the corruption, the vulgar corruption of the Second Bank of the United States is coming out. The combination of these two, the political ramifications here I think is really, really fascinating because you basically have these two different camps. On the one side, you have the defenders of everything that's going on. You have your Henry Clay's. You have your propagandist for the bank, which include a lot of very interesting figures like Frederick List, who's a German economist who is studying in the United States at this time, defending this institution. You have the old Hamiltonian guard that will still defend the importance of these things. But the other side of it though, you have kind of the rising of a radicalized hard money, bank skeptic, free market, intellectual vanguard. You mentioned how there is renewed interest in the ideas of economists like Jean Baptiste and the Tracy. I know I'm butchering that name. Can you talk a little bit about this dynamic where you have, within this Republican party, you have two very much different camps respond to this intellectually. I think this is stuff I love with in American history. The panic of 1819, you had this, the second bank of the United States caused this big credit bubble, and then it contracts to save itself from going illiquid if it's losing too much species. William Gouch had the famous quote, the bank was saved, but the people were ruined. This caused a lot of controversy. People were upset about this. They were upset that there was this downturn going on started in basically February of 1819 right around the scandals of the Baltimore branch being exposed. And then especially after basically those individuals get off with a slap in the light slap on the wrist. These people go on to have successful political careers afterwards. There's no consequences at all to this stuff. Yeah. Basically, and this infuriates people because it seems that, well, this bank is basically this giant monster, this hydra, if you will, that's corrupting the very fibers of the government. And so you see this growth in either the hard money forces, the people who are opposed to central banking. They're opposed to fractional reserve banking. They want to reform the monetary system along the lines that Jefferson proposed in the 1790s, but he didn't really carry out in his first administration. And then you see the soft money forces, the guys of Henry Clay, Daniel Webster, John Quincy Adams, even John Marshall, et cetera, who are basically advocating, yeah, well, this central bank is good. It's actually we need more central banking because in order to stabilize the economy and to promote economic growth and so on. And this was really kind of dovetailed nicely with these new intellectual works coming out. Some of us says and the Tracey's works had to suit the Tracey's works were being translated into English and promoted partially one individual who's doing this was Thomas Jefferson, which I think is really cool. He's once he's out of power, he's kind of back in the saddle for laissez-faire as I put it. And that just shows you how he was just really a good ideologue. And he was always someone better outside of office than in office. I believe Murray Rothbard once said that. And you see that these individuals are advocating, well, they're anti-central banking. They're arguing, well, we need to either have 100% reserves or some form of free banking among fractional reserve banks. So to promote competition, this would limit credit expansion. And then you're seeing various American system economists of the Henry Clay variety, they're promoting additional government intervention, they're justifying the central bank and so on and even some establishment periodicals, they're doing this. And so this is something I try and hammer home all the time in my book as well as when I'm giving talks and et cetera, you've got the abstract theory that various economists and intellectuals develop and that has to actually get filtered down to the masses in some way. So either through newspapers or shorter writings, et cetera, many Americans had learned of say the writings of say through college, say's work was a very popular college textbook, et cetera. And this is how ideas get filtered down and why you need sort of that structure of production. So the forces of liberty had kind of amassed the structure of production. And this led to this really brilliant, I'd say heroic, resurgence of hard money thought that would exert a very important influence in American history in the decades to come. Diving even further down to this battle, I mean, I think Women Mary, right, Thomas Jefferson required had say's book, textbook within Women Mary in particular, if we're looking at on the other side, I love highlighting the national intelligentsia that, which is a weapon of the nationalist, you know, pro-central banking Republicans that that not only gets, not only out there defending the actions of the second bank of the United States, but then has it followed up with lucrative contracts given to this publication, you know, by the government. So, you know, you have that aspect of it very much. And again, this is the same way the Federal Reserve acts right now, right? You know, one of the largest sources of grant money within the economic profession is the Federal Reserve. Surprise, surprise, the majority of the research coming out from the economic profession is very pro-central banking, right? We saw this happening right back then. I think also the importance of, again, the newspaper industry is drawn down purely ideological lines, their roles and responsibilities in terms of educating the public on the ideological line. And this is where this battle of ideas really was going on during this period. There was no sort of, you know, fair and balanced, you know, beyond politics sort of arguments being made from these publications. I mean, these are publications with agendas. And I also love, get another point in favor of just the plotting of the second bank United States allies, the fact that the main offices were located in Lexington and Louisville, Kentucky, a tip of the hat to Speaker Clay. Again, I just really, really on the nose within that one. Let's also just identify some of the hard money individuals that you highlight, because I think it's interesting. We have to be thinking about different sections of the country in particular during this period. But this is something that was making moves and motivating different camps within the Republican Party around the country. So in Tennessee, we have Mr. Jackson, as well as a James K. Polk, who might be relevant later on. In Missouri, we have our good friend, Thomas Hart-Bitten, and Amos Kendall. With in New York, we have what's interesting is kind of two different factions joining on the hard money issue between the Clintonians and the uprising Van Buren gang, who, you know, we're on different sides of other issues, but have now joined on this particular topic. Is there anything that we need to really, yeah, a lot of these actors are going to come up in various episodes? Is there anything else you want to add on to? Again, we see these fault lines really forming on both sides in ways that are really going to play out when Andrew Jackson comes in charge. Is there anything you want to add on to that? Yeah, really just to emphasize, as you mentioned, these fault lines were developing. A lot of the characters that we'll be talking about had kind of, as I mentioned, cut their teeth during this issue. That's when they hone their skills. So you have Henry Clay and Daniel Webster, two notorious wigs in ardent defenders of central banking in the Jacksonian years. We're working for the central bank. They were getting money from the central bank. Sort of a conflict of interest, as any person would argue that, well, you're having politicians, they're getting paid. Daniel Webster, one of my favorite individuals, not in terms of I respect the man, but I just really enjoy just talking about him because he's absolutely so venal. He's a congressman and later a senator in Massachusetts. And it just totally in the pockets as we'll see as this group of manufacturers and merchants known as the Boston Associates. And really Daniel Webster, he followed one principle his entire life, followed the money. He has some great quotes where he's writing letters to the central bank saying, I want my retainer renewed or refreshed as usual. Basically saying, if you want me to keep defending this institution, you better pay up. And so he's starting his career really at this time. And of course, the crony connections are obvious. Guys like, as you've mentioned, Andrew Jackson is really starting his political career in many ways by fighting central banking, by fighting the second bank of the United States in Tennessee, trying to stop the establishment of a branch there. You got Thomas Hart-Benton, as we've mentioned, Martin Van Buren, and various intellectuals or policy analysts, guys like Amos Kendall, an individual who Murray Rothbard includes in his history of economic thought. He actually was a utility theorist. He wrote some articles and stuff on utility as the source of value. And this is opposed to like labor. So this is his big thing. Rothbard gives him his credit. And this is the same guy who we now know wrote Andrew Jackson's bank veto. So I mentioned in my book, it's actually not Roger Tawny. A lot of people thought it was him. Turns out it was Amos Kendall, right? He wrote the bank veto, right? Jackson commissioned him. Tawny maybe did like a couple edits, but it was Kendall. And so you got this utility theorist. He's also fighting central banking. This is like this, this giant heroic thing. I don't know. I'm sure Rothbard was very happy at that connection. But just that these individuals, they start their careers as a result of the Panic of 1819. And all of their policy actions, the Jacksonians later did vetoing, Jackson vetoing the Second Bank of the United States, Martin Van Buren establishing the Independent Treasury, Jacksonians fighting bank charters on the state level through general incorporation laws and free banking laws and so on. This is all emerged as a result of the Panic of 1819. It was a very traumatic event, much more important to the average person in the Missouri crisis of the same year. And it is something that really hardened the battle lines regarding cronyism and really the great struggle between liberty and power. I also love that it's people like Clay and Webster that are just so romanticized in American history. These are the men that we are told are the great men of this era. If one of them had been elected president, they'd have gone down in history as one of the top 15 presidents of all time, no matter what happened. A lot of them have been completely disastrous when on their administration just because, again, just the way they're just so romanticized, there's just something about them that seems to just boil or play in your mainstream just a story and really tend to fetishize some of these types of personalities involved. One last thing on this topic before we get into McCullough versus Madison, you highlight how the policy reaction to the Panic of 1819, often from who we would consider the right side of this, the hard money, bank skeptic class. Unfortunately, their legislative moves to this were in some ways actually detrimental to the banking environment. Because they're responsive. They see these banks acting irresponsibly. And so their reaction is, okay, we're going to make it harder to create, to chart a new banks. We're going to shut down in some ways this industry where what it's actually doing is protecting the current actors within the industry and preventing some sort of market mechanism, something that is resembling free banking and Louis von Mises' idea that if you have a true banking system, it's going to lead to a lot more responsible policies in terms of credit expansion and the like. So even though their instincts, they were analyzing the situation, they were recognizing the proper the true problems with that economic system, the policy response wasn't necessarily what the doctor was asking for. Can you touch on that a little bit? Yeah, absolutely. Because this is an important issue that sometimes the best intention reforms might actually make problems worse. You have to have the right economics backing the reform. So this is something that had kind of plagued various opponents of monetary cronyism. Since the 1700s, partially I would say one of the reasons because Adam Smith himself wasn't that great on money. He had become sort of an apologist for the Bank of England. And this is something Hamilton used to leverage to full effect. People would criticize the central bank or they criticize these monopolistic licenses known as bank charters. They didn't really know what to replace it with. So some people said that bank charters are bad. We're creating these monopoly corporations. So therefore, we need to grant even less bank charters. You would think that, okay, actually, well, that might make sense, right? You got these things are bad. So you want to have less of these things. But by doing so, you're actually strengthening the existing licensed companies because they're not facing any competition. So in Virginia, in New York, there were various proposals to restrict banking or to restrict the number of charters. And you think that, okay, that's actually going to make a difference, but it's actually strengthening the underlying banking oligarchy. So you really didn't have until the 1830s or so, the development or at least the development of the free banking doctrine in the United States by Jacksonians William Cullen Bryant and William Leggett. These were individuals that realized that the actually the adverse clearing mechanism restrains credit expansion. So you want more banks, you want the freedom of entry, you don't want the government to block off entry in the banking system. We weren't there yet regarding sort of the proto Jacksonian coalition that was forming. Okay, and this is what we'll talk more about this once we get into the bank war of Andrew Jackson's era. But it is important to note that there was this issue over how to reform the system. And the advocates of liberty, the forces of liberty, they weren't quite there. They weren't quite yet there, so to speak. One of the great tragedies of early American history is the fact that Richard Cantillon's essay on economic theory was not translated into English into until I believe the first copy came out in 1931. And as Mark Thornton will tell you, the first accurate translation did not come about until much later. But that would have solved a lot of the issues that Adam Smith had on the money side of things. I'm going to change a little detail, get some Cantillon out, more Cantillon, less Smith. And maybe we could have solved some of this stuff back in the 1820s. And yeah, just to interject here, I do think it's notable that the early laissez-faire economists were relying, say like the Jeffersonians, they were relying more on Smith. And also some of John Taylor of Caroline, he was really America's first economist, and he was a part politician too. But when you see this emergence of free banking, and you see this much more radical hard money thought, this is when those French economists, although say consider himself a Smithian, as Rothbard points out, he did, but he was really closer to the Cantillon-Turkgo line of things. Once those guys actually exert their influence along American intellectuals and American politicians, that's when you actually start to see the monetary reforms passed. I think that's something that is definitely is not a coincidence. So one last topic that we must cover, you know, perhaps the most important Supreme Court case is McCulloch versus Madison, and Maryland, sorry, McCulloch versus Maryland. And this goes back to our dear friends with the Baltimore branch of the Second Bank of the United States, where what McCulloch is battling against is Maryland's attempt to protect the people of its state from this corrupt central bank. And, you know, McCulloch sues, saying that the bank is constitutional, the state has no right to interfere. They're trying to place a tax on bank notes for banks not chartered in the state of Maryland, which only pertain to the Second Bank of the United States. Are my details on there correct? And can you just talk a little bit about the Supreme Court case? Yeah, absolutely. So this was a famous case that was emerging. So this is the same McCulloch who was embezzling. He himself just basically refused to pay the tax, and that's why it's called McCulloch versus Maryland. Basically, Maryland was trying to tax the bank like it attacks its own state banks and saying that, well, the federal government is not above Maryland. Other states were doing this. The Second Bank of the United States basically tells the states to go pound salt and saying, no, we're not going to pay. And so this court case winds up in the Supreme Court, and then you're getting the lovely John Marshall and veteran land speculator and former investment partner of Robert Morris, a true crony among cronies. We had to fit Robert Morris in one more time. I had to fit him in one more time. I can't let him go. And he's deciding that he's ruling on this court case. And you really get the whole cast of characters, Clay and Webster, you know, they're defending the bank. You even get old Luther Martin who's attacking the bank. He's a great anti-Federalist, Maryland anti-Federalist. He's one of the few hardcore anti-Federalist present at the Constitutional Convention. Luther Martin, though he had joined the Federalist Party simply because he hated Jefferson and Madison, much like Patrick Henry. He had spent his waning years still fighting government as well as he was also apparently a notorious alcoholic too. So he's sort of attacking the bank in the court and I'm assuming just smells like alcohol and all of this. And he's inebriated and everything, but he's got the right idea. It's the thought that counts. And maybe he knows how to drown his sorrows knowing which way the government's going to go on this. And so the Supreme Court basically rules that, no, the states cannot tax the bank. The bank is the federal government. The federal government is above the states. And John Marshall, an individual who owned stock in the bank, he sold it right before the court case. But again, it's just really one of those little details you never hear about. But like you're like, oh, okay, maybe that's slight conflict of interest among many other things. Basically says, well, the federal government can do whatever it wants. So he used this, I use this case as an opportunity to really flex the broad constructionist that old Hamiltonian interpretation of the US Constitution. The interpretation that I would say is right, not that I agree with, but I would say is actually what the Constitution was intended to do. If you look at the constitutional convention debates and the ratification debates, and you look at what Murray Rothbard wrote in the fifth volume of Conceived in Liberty, and he basically says, yeah, the federal government could do whatever it wants. It's necessary and proper. It's everything under the sun. And really just the federal government can't be touched, not only the bank, but just the federal government, the federal government is supreme over the states. And this is really a really big shock to a lot of people because they had seen some warning signs or some earlier Supreme Court cases, but this is truly people thought that, okay, the anti-federalists were right. The US Constitution is this big government document that basically allows the government to do whatever it wants. And it really kind of shook a lot of people into the state's rights direction. And so there we have it, one of the most important Supreme Court cases of all time. The case that solidified that the Constitution succeeded at its core of forcing all the states into a union that they cannot, that they have no more control over was all an attempt to defend some of the most vulgar corruption from the banking system that this country has. Well, I mean, they've continued legacy in many, many ways. But I mean, at this time, the most vulgar examples of it. And again, this is the stuff, the behavior of the McCullis of the world is what is driving this radicalization of this soon to be on the stage, Jack Stoney and Wing. Again, fascinating, fascinating period right now. We will be diving, we'll be revisiting the era of corruption next episode with some more with the Monroe administration. If you are interested in any of these things, again, you can get your copy. If you don't have it now, what are you doing? Get your copy of cronyism, Liberty vs. Power in America 1607 to 1849. We do have a discount at the Mises bookstore using the promo code LVP. Also with that LVP promo code, if you want the Panic of 1819, which after this episode, of course, you're going to want the Panic of 1819, we're going to have a discount on Murray Rothbard's dissertation there. An absolute must read about this period of time. Again, the Fed even recommends it. And even though there's only, we don't have any hard copies of the book anymore, I do appreciate that at the, at Mises.org, we still have the PDFs of A Short History of Money and Banking by William Gouch. And he's one of those economic writers during this period, who is doing really fascinating stuff. I mean, this book was published and read throughout Europe as well. So again, for overthinking about early American economic thinkers, William Gouch is one of those very, very strong views on money and banking. You can find that PDF within the Mises library. Patrick, is there anything else that people should be diving into if they find this particular episode, this period of time, both infuriating and also fascinating? First of all, let me just mention that Valentine's Day is coming up. So most guys get their dates, you know, chocolate or roses, et cetera, but a copy of cronyism in the Panic of 1819, I mean, that's really a killer combination there. So just want to throw that one out there. But yeah, I would say it's really, really those books. I would also get Murray Rothbard's a short, excuse me, History of Money and Banking in the United States. That's a classic. There's a lot of great articles online. Even Tom Woods Meltdown has a history of some banking panics during this time period, but there should be plenty of material. Cronyism has plenty of sources as well as, and then there's also the Panic of 1819. But I'd recommend getting all the material you've mentioned from the Mises Institute bookstore. Preferably. Well, again, if you like this content, please rate, review, share all those things you're supposed to do with the podcast for Patrick Newman. This has been Thoe Bishop. Thank you for tuning in. Until next time, this has been Liberty vs. Powell.