During the period of 1840 to 1855 there had been established throughout the country a system of banking, under state laws, called "free banking/' by which banks were allowed to issue circulating notes based upon little or no security, and subject to • very loose and inadequate restrictions. The chief object in the scheme seemed, on the part of the banks, to be to issue notes, get them into the hands of the people for value, then take measures to prevent the note holders from calling on the banks for specie. Various subterfuges were resorted to for this purpose. In one instance in Illinois, where an effort was made to present the notes at the bank's counter for redemption, no counter was found, but merely a hired room in a remote and obscure neighborhood. This unreliable system of banking was permitted by statutory enactments in sixteen states, and under it "mushroom banks" were started in large numbers all over the west. Paper money was plentiful and counterfeits floated in large quantities. These conditions induced speculation of all descriptions. Cities were laid out, railroads projected, and debts piled up at high rates of interest, all based upon the prospects of large returns in State Banks and the Panic of 1857 the near future. A panic was inevitable, and in the autumn of 1857 it came, carrying down in the ruin thousands of reputable firms, and entailing untold misery as usual upon innocent widows and orphans. Nevertheless many of the banks which had failed got on their feet again within the next three years, so that when the war began, in 1861, there were 112 of these so-called "solvent banks" doing business. This "wild cat" money continued to circulate until it was driven out of existence in 1863 by the 10 per cent tax imposed under the National Banking Act.

The period which we are just now considering - the decade preceding the Civil War - was notable for the increased number of its inventions and improvements in the processes of manufacture. In 1857 there were issued 2,000 patents, 438 of which were for agricultural implements and processes, consisting chiefly of improvements in cotton gins, rice cleaners, reapers, mowers and plows. The next year there were issued 3,710 patents, of which 153 were for improvements in reaping and mowing machines, 42 for improvements in cotton gins and presses, 164 for improvements in steam engines, and 198 for improvements in railroads and railroad cars. Some of these inventions have proven of the greatest importance and economic value to mankind, such as those relating to the perfection of the sewing machine, printing presses, and the improvements in the manufacture of rubber goods, carpets and wall paper. Prior to this period ready-made clothing and boots and shoes were practically unknown, these articles being made in small shops, employing a few workingmen, but now with the advent of machinery for cutting, sewing, etc., they began to be turned out by factories at greatly reduced cost to the consumer.

With the minds and energies of the people thus absorbed in their abounding material prosperity, new inventions and improved processes constantly appearing to render human labor more effective, and matter yielding to the brain and energy of progressive man, we approach the great Civil War (1861-1865), which marked the opening of a new era in the commercial as well as political history of our country. Prior to this time the North had been the manufacturing section and the South was devoted almost exclusively to agriculture. Owing to their diverse interests these two sections had been in almost constant contention for the past fifty years over the tariff question, but gradually there had loomed up another and even more serious cause of disagreement, the slavery question. The two conflicting systems of labor, free in the North and slave in the South, would not mix. Emigration would not put itself in competition with slave labor, and hence passed in parallel lines westward across the North. Now came the Civil War, which cost 600,000 lives and an incalculable amount of property, and resulted in an industrial revolution of the labor system of the South, forcing that section to adopt the system existing elsewhere, and therefrom dates the mechanical development of the South.