Farmers and land speculators purchased many acres of public land from the federal government, which they were able to do on credit. Speculators, would buy land as cheaply as possible on credit inflating the sale price to prospective buyers in order to make a profit.. Agricultural exports rose to $57 million in 1817, reaching a peak of $63 million in 1818. Benefiting from the boom period, In some instances, quite commonly, the farmer was a speculator as well. He would buy additional land for the sake of a quick profitable turnover, adding more to his crushing burden of accumulative bank debts. Bankers were extending credit with wild abandon, assuming that the boom would last forever. The banks benefited greatly through capital ventures and speculative lending. Stock traders, bankers, and auctioneers all were filling their coffers, with the rewards of their services.
Farmers and speculators primarily used the loans to purchase federal land in the American West. When the economic crisis came in 1819, thousands of overextended farmers and laborers found themselves badgered by the frantic creditors demanding their money. 
Merchants in the big cities rushed to liquidate their assets to pay the debts owed to foreign creditors. They in turn would put the squeeze on the smaller merchants and the shopkeepers for payment on merchandise which they purchased on credit. Finally, it was the farmers turn, to come up with the money which he didn't have. The falling crop prices and shortage of currency made it impossible for them to repay the banks. This resulted in the loss of their property. Those who had purchased high-priced public land on credit during the boom time when cotton and grain prices were high, were saddled with a tremendous debt facing forfeiture of their land to the federal government.
"Reversions of land to the United States in 1819 totaled 365,000 acres, of which 153,000 were located in the Northwest Territory. The following year, the unpaid balance due on land sales reached more than $21 million, an amount equal to more than one-fifth of the total national debt. Of that amount, $6.6 million was for land in the Northwest. The situation was made more critical by a slump in agricultural prices." (3)
As a consequence of non-payments on the loans, state chartered banks began collapsing.
The wage of the agricultural worker in Massachusetts went from 60 cents a day in 1811 to fifty-three cents in 1819. The unskilled laborers that worked on the turnpikes were paid 75 cents a day in early 1818 and reduced to 12 cents a day in 1819. (4) The chief difficulty of the panic of 1819 was the scarcity of ready money. In order to acquire the items which they needed to survive, the farmers and local inhabitants would resort to bartering.
Factory owners in the United States had a difficult time competing with earlier established factories in Europe. Many American people could not afford the factories' goods due to the lack of money in circulation. Spurred by economic distress in wake of the Panic of 1819 wealthy factory owners experiencing monetary difficulties would be forced to shut down, leaving skilled craftsmen, mechanics and other artisans unemployed.
Imprisonment for debt was a common punishment during the early 19th century. The debtor's prison overflowed and the courts of justice were not able to look after their cases. The plight of debtors in the west was well expressed by William Greene, secretary to Governor Ethan Allen Brown of Ohio, in a memorandum to the governor in April 1820:
"One thing seems to be universally conceded that the greater part of our mercantile citizens are in a state of bankruptcy that those of them who have the largest possessions of real and personal estate.....find it almost impossible to raise sufficient funds to supply themselves with the necessities of life that the citizen of every class are uniformly delinquent in discharging even the most in fling of debts. " (5)
To be continued: The Panic of 1819 (4)Footnotes:
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