Abstract
Credit expansion by Bank of the United States in the early 1790s unleashed an investment bubble in real estate, manufacturing, and infrastructure projects. Domestic inflation created a disparity in international prices that led to a reduction in net exports and eventual specie outflow and deflation. An ensuing credit crunch brought a recession involving declines in prices and nominal GDP, the bursting of the land bubble, and a cluster of business and personal bankruptcies. We detail changes in credit, the price level, and interest rates caused by this expansion, as well investment errors that these conditions spawned.
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