Crisis of 1772

The Crisis of 1772 was a financial panic impacting primarily Europe but also the American colonies. It commenced in June, 1772, and followed a period of credit expansion that had produced the boom of 1770–1772.

The crisis was precipitated by the failure of banks in London and Scotland, which caused crashes in the stock markets of London, Amsterdam, and Paris. Especially hard hit were shares of the East India Company, already facing financial troubles. In September, it defaulted on its payments to the British Treasury, harming the financial situation of the British government.

To raise money, Parliament passed the Tea Act of May 1773, which served to extend the East India Company's monopoly to cover America. This made it possible for the East India Company to circumvent American merchants and sell tea directly to Americans, undercutting existing free trade in tea with the Dutch, and raising the specter of the East India Company gaining a monopoly in America in other goods as well.

The act was widely opposed in the colonies, especially by American merchants, and led to the Boston Tea Party.

References

• Rothbard, Murray N. "Tea Launches the Final Crisis," in Conceived in Liberty, 3, pages 260–264.