Ernesto de la Cárcova - Sin pan y sin trabajo

The Baring crisis or the Panic of 1890 was an acute

recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...

. Although less serious than other panics of the era, it is the nineteenth century’s most famous

sovereign debt crisis A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full when due. Cessation of due payments (or receivables) may either be accompanied by that government's formal declaration that it wi ...

, and the 17th largest decline in U.S. stock market history.

Background

The crisis was precipitated by the near insolvency of

Barings Bank Barings Bank was a British merchant bank based in London, and one of England's oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 by Francis Baring, a British-born member of ...

in London. Barings, led by Edward Baring, 1st Baron Revelstoke, faced bankruptcy in November 1890 due mainly to excessive risk-taking on poor investments in Argentina.

Argentina Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country in the southern half of South America. Argentina covers an area of , making it the second-largest country in South America after Brazil, th ...

itself suffered severely in the recession of 1890 with its real GDP falling by 11 percent between 1890 and 1891, An international consortium assembled by William Lidderdale, governor of the

Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government o ...

, including

Rothschilds The Rothschild family ( , ) is a wealthy Ashkenazi Jewish family originally from Frankfurt that rose to prominence with Mayer Amschel Rothschild (1744–1812), a court factor to the German Landgraves of Hesse-Kassel in the Free City of Fra ...

and most of the other major London banks, created a fund to guarantee Barings' debts, thereby averting a larger depression. Nathan Rothschild remarked that if this had not happened, perhaps the entire private banking system of London would have collapsed which would have caused an economic catastrophe. The international financial distrust generated with this crisis burst the

bubble Bubble, Bubbles or The Bubble may refer to: Common uses * Bubble (physics), a globule of one substance in another, usually gas in a liquid ** Soap bubble * Economic bubble, a situation where asset prices are much higher than underlying fundam ...

in the Brazilian economy, which had been inflating since the previous decade, bringing forward its expected end and seeing a Brazilian

financial crisis A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...

, which in turn along with Argentine and Uruguayan crises slashed repatriations and short-term investment by

European European, or Europeans, or Europeneans, may refer to: In general * ''European'', an adjective referring to something of, from, or related to Europe ** Ethnic groups in Europe ** Demographics of Europe ** European cuisine, the cuisines of Europe ...

immigrants Immigration is the international movement of people to a destination country of which they are not natives or where they do not possess citizenship in order to settle as permanent residents or naturalized citizens. Commuters, tourists, an ...

from Latin America to their countries of origin, affecting the region significantly in the 1890s.

Background

See also

References

Further reading