8. Another product of monetary policies during the Napoleonic War, the Panic of 1825 saw stock markets plummet and cripple the English financial markets
In the course of the Napoleonic Wars, the nations of Europe embarked on monetary policies founded heavily upon debt. This was no truer than for Great Britain, which amassed an enormous national debt to finance its campaigns, sufficiently large that it demanded the introduction of the first income tax in 1798. In 1825, this speculation and borrowing barrelled to a conclusion, culminating in a stock market crash. Six London banks, in addition to sixty county banks in England, were forced to close, with only an infusion of gold from the Banque de France saving the Bank of England itself from ruin.
The first modern economic crisis not attributable to external events, the precise causes of the panic are still debated. Some economists, like Ricardo, blamed the Bank of England’s ignorant pursuit of a policy of deflation which aggravated the already painful transition from a wartime to peacetime economy. Others have highlighted excessive speculation in Latin American markets, in particular sizable investments made in the fictitious country of Poyais invented by con artist Gregor MacGregor. Meanwhile, modern economists continue to explore the impact of the diversification of European economies at this time, a natural product of the early industrialization process.