Final answer:
Andrew Jackson's policies, notably his attack on the Second Bank and the Specie Circular, led to credit expansion followed by severe inflation and monetary contraction, contributing significantly to the Panic of 1837.
Step-by-step explanation:
Andrew Jackson's Contributions to the Panic of 1837
President Andrew Jackson's policies played a significant role in contributing to the Panic of 1837. His attack on the Second Bank of the United States set off a chain of events that destabilized the financial system. One of Jackson's key actions was the issuance of the Specie Circular, a mandate that required the purchase of government land to be paid for with gold or silver, dramatically contracting the money supply when the Bank of England cut down on loans to America. Furthermore, his decision to remove federal deposits from the national bank and place them in various state banks, known as pet banks, eliminated checks on credit expansion leading to severe inflation.
When British bankers started demanding payment in specie from their American counterparts, it precipitated a drop in cotton prices, one of America's main exports, worsening the economic environment. The culmination of these policies and external pressures led to the suspension of specie payments by banks, signaling the onset of the economic panic. This financial crisis was exacerbated by the lack of a centralized bank to manage the crisis, as well as insufficient government regulation of the banking system, which were direct results of Jackson's economic strategies.