20 Times in History that Financial Markets Collapsed

20 Times in History that Financial Markets Collapsed

Steve - January 19, 2019

20 Times in History that Financial Markets Collapsed
The Fall of the Prussian fortress of Kolberg to the Russians in 1761, by A. Kotsebu (c. 1852). Wikimedia Commons.

14. Retaining strong parallels to the 2007-2008 Financial Crisis, the Amsterdam Banking Crisis of 1763 saw rampant speculative trading bankrupt dozens of financial institutions and require a government bailout

On February 10, 1763, the Treaty of Hubertusburg marked the end of the Seven Years’ War. During this conflict, Berlin had established itself as a prominent financial market with Amsterdam bankers acting as the primary sources of credit. Enjoying the profits from staggeringly high grain prices in wartime, numerous institutions, in particular the De Neufville bank, leveraged capital and purchases far beyond safe limits. For example, Neufville bought 1.1 million guilders worth of grain from a Russian syndicate in April 1763. In the aftermath of the war, Frederick of Prussia dumped unused grain into Lower Silesian markets, resulting in a decrease in the cost of wheat by more than 75% in May.

Suddenly responsible for a payment of 700,000 guilders without means of raising the capital, Neufville, who had previously led the frenzied wartime purchases, collapsed. The bankruptcy of the massive bank sent a shock-wave throughout the financial houses of Europe. Debts were called in, brokers were inundated with requests for payment, and the availability of coin dried up. Although the Bank of Amsterdam sought to mitigate the severity of the crisis, issuing emergency lines of credit, within two months more than 30 banking houses had declared bankruptcy with combined debts exceeding 10 million guilders.

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