“For many months, my friendless family have to a great extent felt the want of the most ordinary necessaries of life – many months without meat & strangers to a single comfort – nearly all of them upon sick beds – my own health much impaired, and my mind tortured all day and all night,” Peter Randolph Beverely to told his brother Robert in February 1820, in the aftermath of America’s worst financial panic to that time. Beverely and his family were far from alone. The Panic of 1819 had ushered in a recession replete with high urban unemployment, low land prices, and a crush of lawsuits mitigated only by stay laws. The Panic brought something else with it, too, an increase in moral hazard. Some people, like Beverely, scraped by under difficult circumstances. “A Thousand Hungry Rascals,” however, were driven to desperate measures, including defrauding investors and fellow entrepreneurs. “The sudden change of fortune in so large a portion of the community,” Norfolk merchant John Cowper observed, “must produce very injurious effects on Society, not only in their own industry lost, but the industry of an infinitely greater number, who depended on them for employment. Men who have been accustomed to active lives, suddenly thrown out of employment, become at first depressed, afterwords desperate.” That desperation, he reasoned, much like a modern economist, would increase fraud and other disreputable activities.
As the economy worsens, be on the look out for desperate scams!