Panic invaded the financial sector when a partner decided to evade a debt payment in London.
The decades of 1760 and 1770 They witnessed a Credit boom in Europewhich facilitated the expansion of manufacturing, mining and internal improvements mainly in Great Britain as in the thirteen colonies. Supported by merchants and bankers, this period was considered prosperousand thanks to the Townshend law and the breakdown of the law of no importation there was an important Export growth from the country to its colonies.
However, in peace times the storm arrived; Alexander Fordycea banking partner Neal, James, Fordyce and Down In London, had lost £ 300,000 in shares of the Eastern Indies Company. Although it seems a harmless movement, On June 8, 1772 Fordyce fled to France to avoid paying the debt, which resulted in a collapse of the British firm.
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As a result came a generalized panic in Londonsince economic growth depended largely on the use of credit. And as credit depended mainly on trust, once it decreased, Banks declared bankruptcy. A crowd met in financial entities to withdraw their deposits, which was the trigger for the crisis of 72 ‘credits.
The effects of the credits crisis in 1772
In Europe the negative effects came for those banks that managed their stability under speculation. An example of this were Ayr Bank’s partnerswho paid no less than 63,63,397 to completely pay their creditors. Due to this process, only 112 of the 226 partners remained solvents until August 1775.
The crisis hit the bankruptcy number. In fact, in London increased from 310 to 484 In 1772 already 556 In 1773. On the other hand, this problem deepened the deterioration of relations between Great Britain and its coloniesespecially those of the south. British merchants urgently requested the payment of the debt, and the American planters faced the serious problem of how to pay the debt for several reasons.
Source: Ambito
