10 Great Financial Collapses in History

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Apparently we’ve been living in some horrific financial crisis for over a year now, and the news simply won’t let you forget about it. You would almost think it was the end of the world, as if this kind of thing is unique to our times and to modern economies, and that it’s a problem nobody has had to deal with before. But history, as always, has something to say about the matter. Plenty of countries have gotten into a sticky situation with their accounts before, and in some of these cases empires have risen, and fallen in no small part due to bad treatment of the books. People have starved, people have gotten rich, and no small number lost their heads.

I’ve tried to give numbers of the deficits in question, but it should be noted the extreme inaccuracy in trying convert money from 600 years ago into modern terms, especially as I am no economist and certainly no mathematician. Early bullion is difficult to convert into modern terms, and in times of economic turmoil the constantly fluctuating values make for a large margin of error. What’s more, early modern and feudal economies are not based on money transactions as we think of them today, and less than 5% of the population would have any money. The first promissory notes used in Medieval Italy would have been entirely used by merchants to transfer money long distances, and were not used by ordinary people until very recently. Furthermore, I have used the pound as a modern comparison rather than the dollar because the pound has existed as a comparison at the time of all these events.

10 The Fourth Crusade 1202-1204

Then: 86,000 silver marks

Now: $41 million

The plan for the Fourth Crusade was to launch an invasion of Cairo, and from there attack Saracen controlled Jerusalem through Egypt. The Crusading movement had lost steam after the failure of the Third Crusade to keep Jerusalem, but nonetheless an army was assembled and the greater part of it gathered at Venice, where Doge Enrico Dandolo had agreed that the Venetian navy would transport them to Egypt. The Venetians had suspended their economy for the better part of a year to construct the transport ships and train almost a third of the population as sailors, and the Doge would not agree to transport the Crusade unless they paid the entire agreed sum of 86,000 silver marks. The Crusaders could only pay 51,000.

Dandolo suggested that, as an alternative form of payment, the Crusade could help recapture the Christian city of Zara on the Dalmatian coast, an act for which the Pope sent a letter excommunicating the Crusaders, but which was luckily misplaced.

Emperor Isaac II of the Byzantine Empire had been forced into exile by his brother Alexius in 1195, who had then gone on a populist rampage, killing the mistrusted Latin population of Constantinople, an act which did not endear the Byzantines to the Venetians. Isaac’s son offered the Crusaders 200,000 marks to help him capture Constantinople and reclaim the throne, and the debt crippled Crusade was easy to convince. When the Crusader’s fee was not met – due to the ransacking of the treasury by the fleeing usurper – the Crusaders sacked the city, pillaging up to 900,000 marks worth of valuables, burning much of the city. The Venetians and other leaders of the Crusade took direct control of the city, forming a corrupt and decadent regime that squandered what was left of Constantinople’s grandeur. The Byzantine Empire, last remnant of the Roman Empire split into several separate kingdoms, and never recovered.

9 The Darien Scheme 1695-1700

Then: £400,000Now: $56 million

In 1695 the Kingdom of Scotland chartered the Company of Scotland in an attempt to bolster its limited finances by joining the other major trading empires of the world in Africa and the Indies. William Paterson, a successful Scottish entrepreneur who had been a founder of the Bank of England, convinced Scottish investors they could dominate East Asian trade by establishing a colony on the Isthmus of Panama, transporting goods by land from the Pacific coast to the Atlantic so that ships could avoid the long and treacherous voyage around South America. The plan, which he had unsuccessfully tried to market to the English government under James II, is known as the Darién Scheme.

Investors from all social strata gave £400,000 to the scheme, and the first ships set sail in 1698, arriving at the Bay of Darién in November, where they began building the colony of New Caledonia. Paterson’s plans were far fetched, however, and the difficulties of life in Central America were not something he had witnessed or researched. His own wife was dead before the colonists even arrived in the mosquito plagued bay, and within 7 months hundreds more were dead from starvation, fever and skirmishes with the Spanish, who considered the area part of their colony of New Granada. Supplies were limited as the English colonies had been ordered not to assist the Scots for fear of angering the Spanish. Even had the colony been properly established, the logistics of hauling cargo across densely forested and rugged terrain would surely have been impossible.

After a second expedition had set sail, without knowing of the already interminable situation, the colony was abandoned, only a single ship returning from the disaster. With almost half of all Scotland’s money sunk into the scheme, only the most die hard Jacobites were against it when the English parliament offered to bail them out as incentive to agree to the 1707 Act of Union, combining the two nations into the United Kingdom.

8 Welsh conquest 1277-1283

Then: £240,000Now: $193 million

Many people will be familiar with the English King Edward I from Braveheart, which we all now know to be a historically dubious, if entertaining, movie. Well, one thing was true about Edward: he was definitely a brutal, megalomaniacal tyrant, and before he turned his malefic gaze to Scotland he was concerned with Wales. Following the Norman invasion, the osmosis of Norman nobility across the Welsh border had opened up feudal debates over lordship between the nobility of the two countries.

In 1277, Edward I, who had ascended the throne 5 years earlier, led an army 15,000 strong into Wales after the Welsh leader Llywelyn ap Gruffud refused to acknowledge Edward’s sovereignty. Llywelyn had previously been confirmed as the sole authority in Wales by the Treaty of Worcester, having allied with Simon de Montfort, the baron whose civil war against King Henry III resulted in the convening of the very first parliament. The first invasion forced Llywelyn to accept a peace treaty limiting his control to the land west of Conway Castle. In 1282, the Welsh rose in rebellion and Edward led an even larger army into the country. Llywelyn was killed in a minor skirmish in the centre of the country.

The cost of the invasions, and the building of a massive network of castles to cow the local population and subsume their culture, was around £240,000, more than 10 times the annual income of the kingdom, and a great deal of the sum was borrowed from Jewish bankers in London. Very soon, no doubt in a fit of conscience, Edward outlawed money-lending and forced the Jews to wear yellow identity badges. Within a year of the conquest he had the heads of their households arrested, and hanged over 300 in the Tower of London, expelling the rest of the population, handily erasing a good portion of his debt, even receiving a tax bonus from the Catholic Church for the immensely popular act. One positive effect of the invasion (always look on the bright side, I suppose) was that a large part of the cost had to be paid by tax grants which were acquired by summoning a parliament, the necessity of which added to the long process whereby a (somewhat) democratic institution took more and more power away from the monarch.

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