Panic of 1640

The Panic of 1640 was an economic shock that struck Massachusetts in 1640 and corresponded with a contemporary crisis in England.

Much of the wealth of the Massachusetts colony had come from emigrants from England, but as that emigration slowed, sources of credit (which the credit had been largely predicated on a continuing flow of immigrant funds) dwindled. This corresponded with the decline of the fur trade in the region.

As a result, prices fell dramatically, as did credit and confidence in the economy. Debtors, now faced with urgent demands to repay, appealed to the Massachusetts General Court for aid. In October 1640 it passed a debt-relief act that inflated the value of the property of debtors. It also established, at fixed prices, corn, cattle, and fish as legal tender. Later, legislation was passed allowing debtors to avoid foreclosure by leaving the colony.

With fur production declining badly, the Massachusetts government attempted to create new industries with subsidies. The fledgling iron manufactures and textile industries were revealed as failures, however.