Liberal Kentucky, 1780-1828

AS HAS been shown, the reorganization of Transylvania University and the election of Holley were the results of the united sentiment and action of the Republican party in 1817-18. The ultimate failure of the new university may be largely attributed to the failure of this party to sustain it according to its needs. This in turn was due to the division of the party itself on the new issues which agitated the state in the years 1817-28. The general economic situation of Kentucky after 1817 was very poor. There had been a brief period, during and following the War of 1812, of apparent prosperity, based upon the necessities of the war emergency, inflation, speculation, and credit buying.¹ As a result of the importation of much English material at the expense of local manufactures, of the inadequacies of the state currency, and of other factors,² this prosperity had come to a sudden stop.

In order to meet the currency condition, two branches of the Bank of the United States, one in Lexington, the other in Louisville, had been established in 1817. These banks, which followed a sound money policy, instead of increasing the circulating medium of the state, tended to force out of circulation the currency of other institutions, such as the Bank of Kentucky, and to drain specie from the state, without introducing adequate new currency? The debtor classes of the

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