Describe postwar expansion after the War of 1812, and explain how it resulted in the Panic of 1819.

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The Treaty of Ghent (1814) at the end of the War of 1812 left all the issues that had led Britain and the U.S. to war unresolved. It simply restored the political conditions before the war. Yet, an important consequence of the war was to strengthen the independence of the American republic and to provoke a surge in nationalism. Speaking to Congress in 1815, President Madison encouraged territorial expansion and economic growth based on higher taxes on imported goods.

After his election in 1816, James Monroe continued Madison's policies. Monroe's Secretary of State John Quincy Adams was the architect of America's expansion as he managed the country's foreign policy from 1817 to 1825. Adams firmly believed that new territories should be acquired through diplomacy rather than war and that they should prohibit slavery. Under Adams, the U.S. reached an agreement with Canada on a new border and settled long-term disputes with Spain which agreed to give Florida to the United States without payment.

Yet, because this postwar expansion had been financed by easy credit, it had fuelled speculative buying of lands. These were bought to be resold at a higher profit rather than to be farmed. As manufacturing fell in 1818, prices also declined, which, together with the cuts of the Second Bank of the United States on loans, further contributed to halt the economy.