Jackson Issues Specie Circular Requiring Hard Money for Land Purchases, Triggering Credit Contraction

President Andrew Jackson orders Treasury Secretary Levi Woodbury to issue the Specie Circular, an executive order requiring that payment for public lands be made exclusively in gold or silver (specie) rather than paper currency, effective August 15, 1836 for purchases over 320 acres. The policy aims to curb rampant land speculation in western territories following Indian removal, where sales of public lands increased fivefold between 1834 and 1836, mostly financed through banknotes issued by state-chartered banks with insufficient reserves backing their currency. Jackson’s order makes a special exception for “legitimate settlers” purchasing 320 acres or less to continue using paper money until December 15, 1836, and accepts certain Virginia scrip. However, the abrupt requirement for hard currency payment creates immediate credit contraction, devalues paper money, and contributes significantly to the Panic of 1837—demonstrating how Jackson’s monetary policies create the very economic instability he claims to prevent.

The Specie Circular represents Jackson’s ideological commitment to “hard money” and his suspicion of paper currency and credit, applied through executive action without congressional authorization. Jackson views the land speculation boom as dangerous speculation driven by unsound banking practices, particularly the proliferation of state bank notes following his destruction of the Second Bank of the United States and deposit of federal funds in politically-connected “pet banks.” These pet banks engage in excessive lending and currency issuance without the regulatory oversight the Second Bank provided, fueling a speculative bubble in western lands opened by Cherokee and other indigenous nations’ forced removal. Jackson’s circular attempts to restrain this speculation by demanding payment in scarce gold and silver, but the policy fails to distinguish between legitimate settlement and pure speculation while creating severe liquidity problems for all land transactions.

The immediate economic consequences prove catastrophic, though most occur during successor Martin Van Buren’s presidency and are attributed to him politically. The devaluation of paper currency accelerates with Jackson’s proclamation, sending inflation and prices upward. The restrictions on credit cause numerous bankruptcies and failures of smaller banks unable to access sufficient specie reserves. In the South, the resulting recession drives cotton prices down well into the 1840s. Small farmers who purchased land on credit become unable to meet loan repayments when their income from staple crops is cut in half. The Specie Circular creates political divisions within Jackson’s Democratic Party, with Senator Thomas Hart Benton and the Locofoco wing supporting sound money while Senators Nathaniel P. Tallmadge and William C. Rives favor continued use of paper currency for economic flexibility.

Because the Specie Circular is one of Jackson’s last acts before leaving office in March 1837, Van Buren inherits the economic crisis it helps trigger. Historians identify the order as a major contributing factor to the Panic of 1837, which begins in May when New York state banks refuse to convert paper money to gold or silver due to depleted reserves. The panic initiates a depression lasting until the mid-1840s, characterized by widespread bank failures, unemployment, and economic stagnation. Congress eventually repeals the Specie Circular through a joint resolution on May 21, 1838, but the damage to Van Buren’s presidency and the economy persists. The episode demonstrates kakistocracy through Jackson’s imposition of rigid monetary ideology via executive order, creating economic crisis while evading accountability by leaving office before the full consequences manifest. The Specie Circular reveals how personal conviction and ideological purity in economic policy, applied without regard for market conditions or institutional expertise, can destabilize the economy while the president responsible escapes political consequences.