Discussion Paper

Crisis Chronicles: The Panic of 1825 and the Most Fantastic Financial Swindle of All Time


Abstract: Centered in London, the banking panic of 1825 has been called the first modern financial crisis, the first Latin American crisis, and the first emerging market crisis. And while the panic displayed many of the key elements of past crises we have covered?fluctuations in money growth, an investment bubble, a stock market crash, and bank runs?this crisis had its own twists, including a Bank of England that hesitated before stepping in as lender of last resort. But it is perhaps best known for an infamous bond market swindle surrounding an entirely made-up Central American principality. In this edition of Crisis Chronicles, we explore the Panic of 1825 and visit the mythical nation of Poyais.

Keywords: panic of 1825; asymmetric information; financial crisis; lender of last resort;

JEL Classification: G1;N2;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2015-04-10

Number: 20150410