Since ancient times and to this day we are stepping on the same rake, often reaping dire results. This list is in chronological order presents the most interesting economic fall in the history of civilization. We may be able to feel more confident on the background of the errors of our predecessors.
10. The destruction of the Roman economy, Diocletian (fourth century ad)
When Diocletian became Emperor, the Roman Empire was in decline. The economy was undermined by a succession of expensive wars and building projects of previous rulers. Rome stood on the edge of disaster. In order to combat the depreciation of the currency, Diocletian held a monetary reform. Many countries throughout history have taken the same economic adventure – artificially increased the value of money. However, Diocletian went completely the other way. He began issuing coins with a gold content higher than the nominal value of the coin, lowering, thus, the price of gold. In response to this insane idea, the majority of citizens began to melt the coins, as the alloy was more expensive. As a result Empire a new wave of inflation. While Diocletian had complicated the situation by setting a price ceiling on most goods to counter inflation means quality.
Economic reforms Diocletian was so controversial that many Roman provinces refused to follow the decrees of the Emperor. The situation has deteriorated so much that Diocletian became the first Roman Emperor, voluntarily resigned the throne. Besides causing additional damage to already weakened Rome's economy, its gross miscalculations in the economic policy resulted in the weakening of the unity of the Empire and the status of the Emperor.
9. The Pazzi conspiracy and the collapse of the banking house of Medici (1470-s)
The Medici family played a leading role in Italy of the Renaissance. Representatives of this family controlled the politics of Florence, he held the positions of Pope and patron of Leonardo da Vinci. Source of wealth of the family an international banking system based Medici in the late fourteenth century. Under the leadership of Cosimo de ' Medici, the Bank has expanded rapidly and, by the time of the death of Cosimo he was in a difficult position. At a time when the financial ability of the Medici was the other family of bankers – Pazzi and Salviati decided to take away their power over Florence. On 26 April 1478, two members of the Medici family was an attempt in one of the Florentine churches. The plan was implemented only partially, but still the Medici was unable to regain control of the situation. The Bank's assets were usually provided reserves by only ten percent, which was very risky.
Thanks to the Pazzi conspiracy and the various wars, the Bank has largely lost competitiveness and had come close to bankruptcy. As a result Lorenzo de ' Medici was forced to tax the citizens of Florence extortionate taxes, ostensibly for military purposes. Finally, in 1494, due to corruption, poor investment decisions and mismanagement, the Bank went bankrupt. While the economy of Florence suffered multi-million damage, and full recovery took years. Given that the Bank misappropriated funds of the charitable Foundation, which provided dowries of girls from impoverished families and belonged to the French king Charles VII, the crisis had international significance.
8. Inflation in Spain (XVII century)
After Columbus discovered America, Spain began an active search of gold in the new continent. Thanks to the American rich mineral resource base, Spain for several decades was one of the richest countries in the world that grew into a mighty Empire. By the second half of the sixteenth century, the Spaniards had to increase production to unprecedented proportions. However, contrary to expectations, the flow of minerals almost dared the Spain. Excess svezheotzhatogo gold and silver in Europe has led to the depreciation of money and hyperinflation in all European countries.
In conjunction with the ongoing military campaigns Spain, inflation has caused irreparable damage to the economy. Instead of bathing in luxury, Spain have completed a series of defaults. These economic squabbles have led to the decline of the Spanish Empire and the glorification of the British.
7. “Pork money” in Bermuda (1616-1624)
In the seventeenth and eighteenth centuries, the British Empire was expanded through the activities of several large retail companies. Some of them were colonized and Bermuda. Immediately after the formation of the settlement, the colonists started to work for the benefit of companies. The workers, instead of wages, were provided with corporate credit (the same thing was practiced by coal mining companies in the nineteenth century). Daniel Tucker, having received a post of the Governor of Bermuda, was canceled signature loans and coined his own copper coins.
As this monetary system had a different economic basis, in addition to ambitions Tucker, the colonists overthrew the Governor. Full economic disaster was averted only because Bermuda was a isolated island. In the absence of the monetary system, the colonists were forced to use currency instead of tobacco.
6. Trolley and swing (1621 year)
When a country gets into debt to Finance the war, nothing good is not the end. In the seventeenth century the tax system was working very efficiently, so new money to the Thirty years ' war Holy Roman Empire was forced to get by minting additional coins. The old coins were withdrawn from circulation, melted, then the melt is added to cheap metals. The name of the crisis has been due to measuring instruments used for the coins before melting. Coins of low dignity have been put into circulation in neighboring areas to avoid damage to the economy of the Empire.
In the end, the coins are returned to the territory of the Holy Roman Empire in the form of taxes and duties. Found out about financial maneuver of the authorities, the people expressed dissatisfaction, the soldiers refused to accept the coins as payment, began to appear leaflets calling for rebellion. In the end, money has depreciated so much that the children played with coins in the street. The subsequent rise in prices has undermined the economies of many of the subjects of the Empire.
5. Tulip crisis in the Netherlands (1636-1637)
Perhaps the most unusual episode in our list. The Tulip mania is considered the first economic bubble documented in history. Appearing in the Netherlands in the early seventeenth century, Tulip immediately became popular. Dutch citizens have become obsessed with the desire to buy fresh Tulip. Since tulips only grow in certain times of the year, so the Dutch created a futures market. That is, when the tulips could not be bought wanting bought the rights to Tulip bulbs, which were supposed to appear in the future.
Soon, thanks to the activity of speculators, prices in the futures market soared to the heavens. At the peak of the boom the price of some bulbs had reached the amount of average salary in Holland for ten years. The bubble burst in 1637, and cost of bulbs dropped to the original level. Like during the stock-market crash of 2008, investors ' funds disappeared. Wonderful floral collapse let in the wind many States, and a fair number of investors had to put teeth on the shelf.
4. The South sea bubble (1719-1720)
The South sea bubble shows us what can happen when speculators in their actions neglect several important limitations. In the early eighteenth century, the British economy suffered from over-spending government. As a result, British investors seriously interested in stories about rich gold deposits in America. To gain access to these resources was formed the Company of the Southern seas, which the British monarchy had granted exclusive rights to trade in South America. South America belonged to Spain, respectively, granted nothing worth, but, despite this, the Company poured investments.
In spite of the obvious obstacles to the success of the enterprise, the investment reached almost the annual GDP of Britain. On the British stock exchange took off. The company has even contracted to buy from the government public debt. Confidence was so high that the Minister of Finance invested in the company several hundred thousand pounds. At the end of 1720 the total value of the shares of the South sea Company amounted to approximately 37 million pounds. Spain, of course, refused to provide British entrepreneurs with their gold, and the stock price collapsed. The blow shook the English economy, leaving many investors with empty pockets. The British economy lost overnight wealth of an entire generation.
3. Mississipi bubble (1716-1720)
Britain was not the only country affected by the mistakes of speculators in the first quarter of the eighteenth century. After the death of Louis XIV, the French economy was completely exhausted by the continuous wars waged throughout Europe, the Sun King. The Treasurer didn't even have enough gold to mint new coins. John law – economist at the French government, proposed to establish a Bank that would print paper money. The government has printed so much money that their number was five times higher than the welfare of France.
To resolve the problem and save the economy from destruction, Lo announced as if new French colony, Louisiana is very rich in gold, which gives excellent opportunities to investors. He hoped that through the investment the government will be able to improve their financial situation and solve the problem with useless banknotes. In 1720, when the promise mountains of gold in Louisiana does not appear, the bubble burst and stocks investors has been devalued. Followed by a panic withdrawal of Bank deposits, currency Lo has depreciated by half, and the destructive inflation has hit the French economy.
2. The Confederation is destroying its own economy (1860)
During the civil war in America the most important objective of the Confederation was to provide diplomatic recognition by European countries. To achieve recognition, they decided to stop exporting cotton to England and France, knowing what an important role was played by cotton in the economies of these countries. It should be noted that the Union blockaded ports of the Confederacy, but the confederates managed quite easily to break through the blockade almost to the end of the war.
Coupled with the blockade of the Union, the refusal to export the cotton has led to almost zero trading profits of the Confederation. These two factors caused a rampant inflation that has devalued the currency of the Confederation. After the civil war the economy of the South was a ruin.
1. The crisis of the Railways and silver in America (1893)
Before the great Depression the worst economic crisis the US was the Panic of 1893. Since the most important mode of transport in the USA steel railroad, speculators actively invested in them. Many Railways turned out to be too stretched and revenues from their exploitation are unable to cover the costs of maintaining infrastructure. In 1893, a giant railway company – “Philadelphia and reading” declared bankruptcy.
At the time, as railway companies began to bump, the silver market experienced a real shock. In the 1880s, there are several silver mines. As a result of the increased production of silver, its value has decreased significantly. The U.S. government has not come up with the best tools against the crisis, buying silver in hopes of artificially raising its cost. However, once the buying stopped, the crisis reached its peak. Resulting economic depression lasted until the early twentieth century, destroying 16 thousand companies and without leaving the work up to 17-19 per cent of the population in the most critical period.
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