Here was again a violent dislocation of capital, effected in the crudest way. As Webster described it, the specie circular “checked the use of bank-notes in the West, and made another loud call for specie. The specie, therefore, is transferred to the West to pay for lands. Being received for lands, it becomes public revenue, is brought to the East for expenditure, and passes, on its way, other quantities going West to buy lands also, and in the same way returns again to the East.” Moreover, while specie was required at the land office, bank-notes passed at the custom-house.
All this was going on at the same time with the distribution of the treasury surplus, — a rare combination of measures to withdraw millions of capital from active employment, to enforce a violent contraction of loans, to keep large quantities of specie and bank-notes in aimless migration, and thus to produce a general confusion which set all calculations at naught. History shows few examples of wilder financiering. No wonder that the money market, which in times of inflation always suffers from spasmodic fits of tightness, became tight beyond measure, and that the signs of an approaching collapse multiplied from day to day. Business men and speculators cast about frantically for some means of relief. There was a loud cry for the withdrawal of the specie circular, and Congress, at the close of the session of 1836-1837, passed by large majorities a bill rescinding it. But that bill Jackson refused to approve. It could have done no good.
