Panic of 1825

The Panic of 1825 was a stock market crash that originated in the Bank of England, arising partly from speculative investments in Latin America, including the fictitious country of Poyais. The crisis was felt most acutely in Britain, where it led to the closure of twelve banks, but also affected markets in Europe, Latin America and the United States. An infusion of gold reserves from the Banque de France saved the Bank of England from collapse.^[1] The panic has been called the first modern economic crisis not attributable to an external event such as war, marketing the beginning of modern economic cycles. The Napoleonic Wars had been highly profitable for all sectors of the British financial system, and the expansionist monetary actions adopted during the transition from war to peace brought a surge of prosperity and speculative ventures. The stock market boom became a bubble, and banks caught in the euphoria made risky loans.^[1][2]

Britain's financial system developed rapidly between 1770 and the end of the Napoleonic Wars, coinciding with the country's industrialization. In 1770, only five stocks were available on the London Exchange, but by 1824, investors could choose from 624 joint-stock companies.