Panic of 1825

Full Name
London Panic of 1825
Event Type
Start Date

Centered in London, the banking panic of 1825 was the culmination of several years of euphoric investment in sovereign debt and precious metals that included one of the most remarkable swindles of all time: bonds sold in the name of a made-up country, called Poyais. The panic has all the features of a modern financial crisis—fluctuations in money growth, an investment bubble, a stock market crash, and bank runs.

Notable Firsts
  • 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
  • Also referred to as the first emerging markets crisis, first Latin American crisis

Key Events

Bank of England cut its discount rate in 1822 to stimulate the economy (first move since the early 1700s)

  • As part of this decision to lend against a wider range of collateral
  • Interest rates dropped, people went looking for income elsewhere and started to invest in Latin America

In England, depositors started to withdraw their deposits in gold (as was law), which resulted in a run on the banks.