Although in the previous part, we finished our story at the stage of financial crisis, which broke out in France, it is worth looking at the next crashes that took place in other European countries.
In 1745, the existence of the Bank of England was strongly endangered. During this time Karol Edward Stuart fought for power in the country, who led the uprising in Scotland and began marching to London. The central bank was an institution hated by the Stuarts and their camp. It was not difficult to imagine that in the situation of Charles Edward’s triumph, the Bank of England would be liquidated or at least its competences would be limited. As far as the Scots troops approached London, panic grew. Eventually, it was averted. What is important, however, not only the victories on the battlefields, but … the statement of the London merchants. Entrepreneurs were so satisfied with the convenient paper money that they announced that they would continue to accept banknotes from customers, even in Stuart’s victory. It’s hard to tell if they were telling the truth. It shows, however, that at that time paper money depended largely on market confidence, which could be both its strong and weak quality.
Everything is connected
However, this is not the end. In 1763, another financial crisis occurs. This time he was associated with the end of the seven-year war and seized Great Britain and Prussia. What exactly happened? Amsterdam, the financial center of Europe, served the loans it gave during the Great Britain conflict. The Dutch have added speculation to each country’s bonds. The DeNeufville brothers’ bank was involved in the latter. To the provision on the bust we still lack the economic incompetence of the rulers. This was taken care of by the ruler of Prussia, Frederick II, who slowed down the coin during the war. After finishing it, he came up with the idea to fix what he had spoiled. Of course, he should be praised for that. However, there is one “but”. By withdrawing the weak currency from circulation, Fryderyk did not take care of a sufficiently quick puncture, he has new coins and their issue. Thus, he brought to the stage the sister of our old friend, inflation – deflation!
After what happened next, you can see how the economies of individual countries can be interconnected and mutually influence each other. Well, deflation in Prussia caused considerable problems, among others bank of DeNeufville brothers, but also other Hamburg banks. The first one eventually even collapsed. The Dutch, wanting to save themselves, began to massively sell the British bonds they had. This caused the crisis in Great Britain again.
The farther into the forest …
In 1772 another crisis affected the real estate speculation market in Great Britain. In this country, in 1788, there was also frantic speculation in the actions of companies that built channels. The canal bubble lasted five years.
It is also worth mentioning the crisis that took place in Poland during the Kosciuszko Uprising. Our country was already after two partitions. Tadeusz Kościuszko was the hero who decided to run out of barricades and defend his homeland. Unfortunately, the terrible state of state finances made it impossible for him to organize an army. Confiscated crumbs from churches and monasteries. It was still not enough. Thus, special coupons (type of bonds) were issued, which were to serve as a form of payment for the army. Unfortunately, Kosciuszko’s victory in the armed struggle was a condition for paying later ores from the state in exchange for coupons. As we know, this has not been achieved, thereby making this peculiar type of bond useless.
To be continued…