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CHAPTER VI.

HE inflation in the Mississippi Valley began at the end of 1815. The president of the Bank of the United States stated to the Committee of 1819 that when the Bank stock was subscribed, specie was at six per cent. premium in the West, and at fourteen per cent. premium at New York, Philadelphia and Baltimore. The inflation advanced rapidly during 1816 in Kentucky and Tennessee, and spread in that and the following years to Indiana, Illinois and Missouri.

.—The popular party had now fallen under the dominion of a mania for banks, as the institutions which could make everybody rich. Clamorous demands were made for a share in the blessings which the Bank of the United States was expected to shower upon the country, and two branches were established as soon as the Bank was organized—one at Lexington and one at Louisville. Prices immediately began to rise, specie was exported, and contracts were entered into, in the expectation of further advance. All hastened to get into debt, especially for the purchase of land, which, in a country of new settlement, always offers a tempting chance for those who have already settled to make profits out of the new comers. "Deeds in old books of record show the to us astonishing fact that town lots on the back streets of the suburbs of Shepherdsville brought prices on time that would now [1882] be esteemed great for the best property in Louisville. * * * Every salt lick and sulphur well was marked as a fountain of prospective wealth, and eagerly bargained for at astonishing values. * * * The most active speculators were those whose means were small."

February 4, 1815, the capital of the Bank of Kentucky was increased to $2 millions, half the increase to be taken by the State. The bank and branches might deal in exchange, United States treasury notes and bonds, and might lend to non-residents and to the United States not more than $500,000 for not more than two years. There were two significant features