The Depression of 1786

I believe that history happens in cycles, and I am going to be publishing a series of short articles about previous depressions.  First is the depression of 1786.

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Summer of 1786 - Americans suffer from post-war economic depression including a shortage of currency, high taxes, nagging creditors, farm foreclosures and bankruptcies.
August 8, 1786 - Congress adopts a monetary system based on the Spanish dollar, with a gold piece valued at $10, silver pieces at $1, one-tenth of $1 also in silver, and copper pennies.
August 22-25, 1786 - Angry representatives from 50 towns in Massachusetts meet to discuss money problems including the rising number of foreclosures, the high cost of lawsuits, heavy land and poll taxes, high salaries for state officials, and demands for new paper money as a means of credit.
August 31, 1786 - In Massachusetts, to prevent debtors from being tried and put in prison, ex-Revolutionary War Captain Daniel Shays, who is now a bankrupt farmer, leads an armed mob and prevents the Northampton Court from holding a session.
September 20, 1786 - In New Hampshire, an armed mob marches on the state assembly and demands enactment of an issue of paper money.
September 26, 1786 - Shays' rebels, fearing they might be charged with treason, confront 600 militiamen protecting the state Massachusetts Supreme Court session in Springfield and force the court to adjourn. --http://www.historyplace.com/unitedstates/revolution/rev-nation.htm

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I haven't spent too much time researching this, but it seems that what I call the "Depression of 1786" was caused in part by a lack of hard currency.  There was a credit crunch, with Europeans refusing to extend lines of credit to Boston merchants, and they in turn demanded hard currency from farmers in Western Massachusetts.  There were many foreclosures and property seizures.  There was also no bankruptcy process, with debtors' being sent to jail.  The unfairness of the situation led to Shays Rebellion.

What ended the Depression of 1786?  First, the US Constitution, which went into effect on March 4, 1789.  It gave the federal government the power to put down revolts, which it did in the Whiskey Rebellion of 1791.  It established a process for bankruptcy.  The Commerce Clause eliminated interstate tariffs.  The Federal government took over state debts, which alleviated pressure on them to collect taxes to pay them.  The establishment of the mint allowed more coins to be issued.  Last, but not least, the First Bank of the United States was founded in 1791 with a capitalization of $10 million, which created credit.

The US was in a recession from 1796-1799, starting with the Panic of 1797 (caused when a bubble of land speculation burst).  This led to the Bankruptcy Act of 1800.

The early united states (plural) to boomed from 1803 to about 1815.  One measure shows the CPI (where 1967=100) rising from 43 in 1802 to 63 in 1814, when the bubble began to burst.  It didn't hit this level again until after WW2.  The Second Bank of the United States began in Feb. 1817, and the New York Stock exchange opened in March 1817.

Kondratiev wave theorists see a Spring that began in 1789, leading to a Summer beginning in 1803 and ending with the end of the War of 1812.  They don't account for the panic of 1797, probably just seeing it as a short interruption of growth.

When did the first US K-wave summer end?  1818 is probably the best guess.  It was caused by a need for hard money to pay for the debts incurred by the Louisiana Purchase. "Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England." --https://mises.org/rothbard/panic1819.pdf

So the first Great Depression of the United States began in the summer of 1818, and that is the subject of another post.