Panic of 1847
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The Panic of 1847 was started as a collapse of British financial markets associated with the end of the 1840s railroad boom. The Bank of England had to request a suspension of the Bank Charter Act to end the crisis. It was caused by excessive monetary inflation due to the Bank of England and fractional reserve banking.
The panic of 1847 cleared away a vast number of unsound business houses, and trade generally became much more sound and healthy; this lasted until the year 1855.
The explanation by Spanish economist, Jesus Huerta de Soto, of Austrian School, is based in Austrian Business Cycle Theory:
"As of 1840 credit expansion resumed in the United Kingdom and spread throughout France and the United States. Thousands of miles of railroad track were built and the stock market entered upon a period of relentless growth which mostly favored railroad stock. Thus began a speculative movement which lasted until 1846, when economic crisis hit in Great Britain.
It is interesting to note that on July 19, 1844, under the auspices of Peel, England had adopted the Bank Charter Act, which represented the triumph of Ricardo’s Currency School and prohibited the issuance of bills not backed 100 percent by gold. Nevertheless this provision was not established in relation to deposits and loans, the volume of which increased five-fold in only two years, which explains the spread of speculation and the severity of the crisis which erupted in 1846."[1]
References
- ↑ Jesús Huerta de Soto. "Money, Bank Credit, and Economic Cycles" (pdf), Second English edition 2009, p.484. Referenced 2011-01-13.
- Evans, David Morier (1849). The Commercial Crisis, 1847-1848: Being Facts and Figures. London.
- Glasner, David (1997). "Crisis of 1847". In Glasner, David; Cooley, Thomas F., eds. Business cycles and depressions: an encyclopedia. New York: Garland Publishing. pp. 125–28. ISBN 0824009444.
- Michael Bordo (2003). Stock Market Crashes, Productivity Boom Busts and Recessions: Some Historical Evidence.
- Arthur Crump, The English Manual Of Banking, Longmans, Green & Co, 2nd edition (1877).