12. The Credit Crisis of 1772 was arguably the foremost underlying cause of the American Revolution, bankrupting southern cotton farmers and demanding restrictive duties in the American colonies
During the 1760s and 1770s, an economic boom, both in Britain and her American colonies, was experienced by many and supported by the ready availability of credit to facilitate expansions. An underlying factor behind banking successes at this time was speculation, which remained highly profitable until June 8, 1772. Alexander Fordyce, a partner in the banking house Neal, James, Fordyce and Down, suddenly lost £300,000 shorting stock in the East India Company and fled to France to avoid repayment. Stimulating panic in the financial markets, the public rushed to withdraw their money whilst banks were forced to call in debts. Those that could not accumulate liquid capital were bankrupted, with at least twenty major institutions shuttered.
Personal bankruptcy in London skyrocketed, rising from 310 between 1764 and 1771, to 484 in 1772, and 556 in 1773. Throughout the American colonies, the crisis was particularly badly felt. Southern plantations had borrowed enormously to finance their activities, with an estimated £2,482,763 of debt held by British merchants in 1776. Moreover, the East India Company, suffering financial ruin and unable to sell its eighteen million pounds of warehoused tea directly in the Americas, lobbied Parliament for the Tea Act. Reducing the price, the Company was granted a monopoly over the American colonies; however, the measure proved highly controversial and became a rallying cry for the American Revolution.