Panic of 1890 - AbsoluteAstronomy.com

The Panic of 1890 was an acute depression, although less serious than other panics of the era. It was precipitated by the near insolvency of Barings Bank

Barings Bank

Barings Bank was the oldest merchant bank in London until its collapse in 1995 after one of the bank's employees, Nick Leeson, lost £827 million due to speculative investing, primarily in futures contracts, at the bank's Singapore office.-History:-1762–1890:Barings Bank was founded in 1762 as the...

in London. Barings, led by Edward Baring, 1st Baron Revelstoke

Edward Baring, 1st Baron Revelstoke

Edward Charles Baring, 1st Baron Revelstoke , was a British banker.-Biography:A member of the famous Baring banking family, "Ned" Baring was the second son of Henry Baring from his second marriage, to Cecilia Anne . Sir Francis Baring, 1st Baronet, was his grandfather and Evelyn Baring, 1st Earl of...

, faced bankruptcy in November 1890 due mainly to excessive risk-taking on poor investments in Argentina. Argentina itself suffered severely in the recession of 1890 with its real GDP falling by 11 percent between 1890 and 1891, the effects of which are illustrated by the picture in this article. An international consortium assembled by William Lidderdale

William Lidderdale

William Lidderdale PC was a British merchant, and governor of the Bank of England between 1889 and 1892.Lidderdale was born to British parents at the British Chaplaincy in Saint Petersburg, Russia, and was educated at Birkenhead in Cheshire.After working for the Russian merchants Heath and Co, he...

, governor of the Bank of England

Bank of England

The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

, including Rothschilds

Rothschild banking family of England

The Rothschild banking family of England was founded in 1798 by Nathan Mayer von Rothschild who first settled in Manchester but then moved to London. Nathan was sent there from his home in Frankfurt by his father, Mayer Amschel Rothschild...

and most of the other major London banks, created a fund to guarantee Barings debts, thereby averting a larger depression. Natty Rothschild

Nathan Rothschild, 1st Baron Rothschild

Nathan Mayer Rothschild, 1st Baron Rothschild, Baron de Rothschild was a British banker and politician from the international Rothschild financial dynasty.-Life and family:...

remarked that if this had not happened, perhaps the entire private banking system of London would have collapsed, which would have created a tremendous economic catastrophe.
The international financial distrust generated with this crisis helped to blow a bubble

Economic bubble

An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

in the Brazilian

Brazil

Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

economy, which had been inflating since the previous decade, anticipating both its expected end, as the financial crisis

Financial crisis

The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these...

that followed on that country, which in turn along with Argentine and Uruguayan crisis, dramatically decreased the amount of money sent by European immigrants to their countries of origin, also affecting the economy overseas in the 1890s.

See also