5. The banking crisis of 1893 in Australia sent tremors through the European economy
Speculation in land led to a boom in the 1880s in Australia, and Australian banks, driven by the belief that land prices and value would increase indefinitely, lent money in amounts far beyond what was backed by their depositors. In 1888 the land boom which was never going to end came to an end, and as many speculators went bankrupt the Australian lenders were unable to recover their loans, acquiring instead land which was less valuable than for what it was mortgaged. In January 1893, the Federal Bank of Australia failed. By the spring of that year, eleven Australian banks had either failed or temporarily closed, to prevent their depositors from withdrawing their deposits. Some of the “failed” banks held gold deposits, safely held in London banks, though the bankers chose not to sell them to accommodate their depositors. Instead they foreclosed on the bankrupt land speculators.
Nature added to the miseries of the Australian settlers by providing severe droughts, which late in the decade included the Federation Drought. Beginning in 1896 and lasting for six growing seasons, the Federation Drought created poor crops and led to heavy losses of sheep and cattle, as well as other livestock. Unable to produce harvests or to borrow money from the banks, Australian farmers were pushed to the limit. Eventually reforms to banking laws and a more regulated banking system were proposed, but the watered-down regulations did little to ease the financial crisis down under for decades. Bankers profiting at the expense of both borrowers and depositors became a feature of Australian culture, reflected in poetry, literature, and song for decades, and contributed to the birth of the bank robber as a folk hero in Australian society.