Panic of 1825

The Panic of 1825 was a stock market crash that started in the Bank of England arising in part out of speculative investments in Latin America, including the imaginary country of Poyais. The crisis was felt most acutely in England where it precipitated the closing of six London banks including Henry Thornton's bank and sixty country banks in England, but was also manifest in the markets of Europe, Latin America, and the United States. An infusion of gold reserves from the Banque de France saved the Bank of England from complete collapse.

The panic has been referred to as the first modern economic crisis not attributable to an external event, such as a war, and thus the start of modern economic cycles.

Bank Improvements

Seventy banks failed. The current view puts a lot of the fault of the crash on the banks for not doing simple due diligence. The Bank of England (a for-profit bank at the time), was blamed for not policing the banks. The Bank of England raised the lending rate to protect its investors, instead of lowering it to protect the public. The self interest of the Bank of England caused additional failures, and England was saved from financial disaster by France. Later policies were changed.

In fiction

An historical novel by Stanley J. Weyman, Ovington's Bank, is centered on the Panic of 1825.

See also

• Great Depression

References

• Bordo, Michael D. Commentary May/June 1998. St. Louis Federal Reserve Review.[1]
• Fetter, Frank W. A Historical Confusion in Bagehot's Lombard Street Economica, New Series, Vol. 34, No. 133 (Feb., 1967), pp. 80–83. [2]
• Haupert, Michael (1997). "Panic of 1825". In Glasner, David; Cooley, Thomas F., eds. Business cycles and depressions: an encyclopedia. New York: Garland Publishing. pp. 511–13. ISBN 0824009444.