The years after the War of 1812 marked the beginning of the first modern "post-war" era. For Americans, the end of the war unleashed a new spirit of nationalism, the rapid growth of cities and industry, and a quickening of expansion westward. This rapid economic expansion was not built on a solid foundation, and soon the nation's first financial crisis occurred.
The War of 1812 stifled foreign trade with the United Stated and spurred the growth of domestic manufacturing, which mushroomed to fill the gaps left by the declining foreign imports. This increase in manufacturing created employment opportunities for many post war Americans in the North East. Changes in production methods came about during this time as well. The Lowell system, used in textiles, placed each stage of manufacturing under one roof. This was the birth of the factory. Many new state banks began operation following the war. These banks began to issue a large quantity of bank notes, not always retaining an adequate supply of hard money to back them up. This new credit and monetary expansion helped fuel the post 1812 boom. Much of the credit was given to increased land speculation. Henry Clay created the American System which created high tariffs to support internal improvements such as roads. The nation was in dire need of better roads to help move manufactured goods. Money poured into road improvement. The first national road was built connecting the Potomac River with the Ohio River. This mercantilist system benefited people in New England, but hurt those living in the South and West. The high Tariffs protected the manufactures in the north from foreign trade. Those in the south feared retaliatory tariffs from other countries which would hurt their export economy.
The panic of 1819 was the first major financial crisis in the United States. It featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing.