CHAPTER TWENTY-SEVEN

THE CREDIT CRISIS OF 1772/3

IN THE ATLANTIC WORLD

Paul Kosmetatos

IN TRO D U CTIO N

O n 9 June 1772, Alexander Fordyce, the Scottish leading partner of the London
bank of Neale, James, Fordyce, and Down, absconded to the Continent after being
caught wrong-footed in his speculations in East India stock.1 Fordyce’s flight and
eventual surrender the following September was the first act of a multifaceted financial
crisis which raged for about a year.2 The initial distress in the London market peaked on
22 June with a series of bank runs, when ‘a universal bankruptcy was expected, and the
stoppage of every banker looked for’.3 The simultaneous impact in Scotland was even
more spectacular, when the ambitious and experimental Ayr Bank (Douglas, Heron
&Co.) was also forced to stop payment on 24 June with over £1.2 million in liabilities.4
A second phase of the crisis centred on Amsterdam in the winter of 1772-3, with
the collapse of the bank of Clifford & Sons among others.5 Ripples were felt across
Europe and in the North American colonies, and the crisis closed its circle in London
when Sir George Colebrooke, Chairman of the East India Company and a notorious
speculator in his own accord, became its last prominent victim in March 1773.6
The on-going financial troubles of the East India Company are the connecting
thread between the two phases of the crisis. Ever since the award of the diwani of
Bengal to it in 1765 had raised expectations of a dividend windfall, its shares had
become an object of intense speculation and had already followed a recognisable
bubble trajectory in 1766–69. The credit crisis in June 1772 forced the Company to
lower its dividend from the very high levels it had reached in previous years,
particularly when the Bank of England discontinued the rolling short-term loans the
Company had come to depend on as working capital ahead of its annual sale in
England. The Company’s finances were finally tidied over by the government and the
Bank of Englandas part of the Regulating Acts of 1773, albeit at the price of some
loss of independence, but the blow to its stock price in late 1772 helped break the
Amsterdam speculators and the banks, which had financed them.7
Although neither Horace Walpole’s fears that ‘one rascally and extravagant
banker [had] brought Britannia, Queen of the Indies, to the precipice of bankruptcy’,8
nor James Boswell’s prediction that ‘1772 [would] ever be remembered as a year of

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confusion, dismay, and distress’ proved accurate in the end,9 the episode possesses
several aspects that merit continued attention. Adam Smith’s references to the Ayr
Bank affair in Book II of the Wealth of Nations have attracted most of what modern
academic interest persists,10 but the affair as a whole is notable for being one of the
first endogenous financial crises caused by growth itself, rather than war or
government policy.11 Its rapidity and geographical extent moreover can easily give
the impression of causal relationships existing between its various episodes, and
promote talk of financial contagion. Contemporaries were indeed quick to do just
that, describing Fordyce’s failure as the spark that ‘set fire to the mine’,12 and
marvelling at the speed with which news of it was brought to Edinburgh by ‘a
gentleman who came down in 43 hours’.13 In the same passage quoted above, Boswell
described the shock in Scotland as just that: ‘like a company connected by an electrical
wire, the people in every corner of the country have almost instantaneously received
the same shock’. This conviction that the 1772–73 crisis displayed contagion
characteristics is echoed in the limited modern literature on the affair. The actions of
the Bank of England to limit the spread and severity of the shock are likewise
proposed to constitute an early instance of a Lender of Last Resort (LOLR) in action,
some thirty years before the classical formulation of the concept in Henry Thornton’s
Inquiry on the Paper Credit of Great Britain.14 Charles Kindleberger considered
1772 as a typical example of financial contagion at work, and an almost canonical
one on the desireability of a LOLR.15 Fernand Braudel even suggested that the crisis’
British origins signify that ‘Amsterdam was no longer the [financial] centre or
epicentre of Europe [and that] this had already shifted to London’.16
While an all-encompassing account of the 1772–73 crisis has yet to be written,
some of its individual episodes have been described in detail. The North American
side of the story is one, thanks in large part to the work of J. M. Price, T. M. Devine,
and R. B. Sheridan.17 All three have identified the financial connections associated
with the colonial trades, tobacco foremost among them, as the likeliest route of
transmission of the crisis from Europe to America. They have moreover drawn
attention to the fact that the crisis occurred at a particularly interesting juncture in
the relations between Britain and its American colonies, falling as it did between the
breakdown of the colonial non-importation agreements in 1770 and the breakout of
hostilities in 1775. The literature is universally (and commendably) careful not to
make too much of the crisis as a direct ‘cause’ of the American Revolution, despite its
close proximity in time. Circumstantial connections do remain, most notably the East
India Company tea destroyed in December 1773, which had found its way to Boston
Harbor through the provisions of the Regulating Acts that accompanied the
government’s rescue loan of £1,400,000. The most that can be safely said however,
is that the crisis may have ‘helped focus the discontent of the colonists…and thus
helped to make [them] more responsive to anti-British propaganda’,18 though even
this cautious a conjecture has been doubted in the literature.19
A more interesting question is to establish whether the crisis was indeed transmitted
from Britain to America in the contagious manner claimed both by its contemporaries
and by later literature. Quite apart from providing a satisfyingly causal narrative for
the crisis, its propagation by genuine financial contagion would support the existence
of systemic risk in the financial system of the 1770s. ‘Contagion’ can be a nebulous
concept, and the literature is unfortunately all too ready to use words like ‘spread’ in

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describing the sequence of the crisis episodes, and thus tacitly assume a causal
relationship between them.20 Causality however is easier to state than to prove in this
as in so many other historical arguments. The mere coincidence of economic
difficulties across different financial centres or economic sectors does not necessarily
imply that contagion is at work. Going beyond this simple causal requirement,
contagion in its purest sense arises from a narrow (or idiosyncratic) shock that is
limited to a small set of institutions. Such a shock can include the outright failure of
a small number of ‘systemically important’ market players (like Fordyce’s bank or the
Ayr Bank in 1772), but could just be the release of adverse news on them, or merely
the heightening of suspicions on their financial health. Any further failures that occur
afterwards must concern players who were completely insulated from this original
shock.21 Therefore such events as the breakout (or end) of war, bad (or bumper)
harvests, and new (or repealed) legislation with broad effect such as regulations or
tarriffs, can be causes of a broad systemic crisis but generally not of contagion.
Contagion should moreover not be confused with the effects of economic recession,
even if they have directly arisen from a financial shock, as these are usually too slow
and open to other external impulses over the lifetime of the crisis. Therefore, contagion
mechanisms are not only causal and sequential but also comparatively rapid.

THE AMERICAN CO L O NIAL TRAD E S

AND THEIR F INANCIAL CO NNE CTIO NS W ITH B RITAIN
Contemporaries attributed the market break to what Adam Smith later termed ‘over-
trading’,22 a term which encompassed both asset speculation during a period of rapid
economic growth, as well as imprudent monetary expansion. Later opinion is broadly
in agreement, sometimes using the contentious word ‘bubble’ to describe the period
preceding 1772.23 According to this traditional narrative, the buyoancy of the British
economy following the victorious end to the Seven Years War and Clive’s advances
in India very soon turned to excessively ambitious projects, conspicuous consumption,
monetary fallacy such as the overuse of redrawn ‘fictitious’ bills of exchange, and
speculation filled with ‘roguery’ and ‘stupidity’.24 This volatile mixture is supposed to
have needed only a spark to ‘set off the mine’, as Sir William Forbes put it in his
famous comment.
Scotland features prominently in this narrative. Following the final defeat of
Jacobitism, the Scottish economy had entered an expansionary phase which accelerated
in the late 1760s and peaked just before 1772. The growth of the Scottish share of the
tobacco trade with North America after 1750 was especially noteworthy, growing
from a fifth of the British total in 1744 to over half in 1769.25 Almost all of this
activity was centred on the Clyde and destined for re-export to England and,
increasingly, the Continent, particularly after Scottish firms won the lucrative
monopoly contract with the French Farmers-General.26 The adoption of the non-
importation agreements by the Americans had a predictably negative effect on imports
after 1765, but after most of the Townshend duties were repealed in 1770 tobacco
imports once again grew rapidly, reaching an all-time high of 47 million lbs in 1771.
This Scottish dominance of the tobacco trade was founded on the cost advantage
Scots enjoyed over their English competitors. Part of this was due to the lower costs
of locally produced manufactured goods that were supplied to the colonists. Henry

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Hamilton estimated that £100 of Glasgow goods purchased £230 of tobacco in

Virginia, although this margin may have incorporated the advantageous exchange
between sterling and the Virginia currency.27 Equally important were the advantages
inherent in the Scottish system of tobacco purchasing in America.
The tobacco trade with Britain followed two distinct business models.28 The older
system, usually adopted by London traders and involving the produce of large
plantations, was the plantation or consignment system. This involved the planter
arranging for a British trader to assume the costs and risks of storing and marketing
his entire crop in Europe (though not those associated with shipping and insuring it)
in exchange for a commission. The merchant in turn arranged for the purchases of
manufactured and consumer goods required by the planter and shipped them by
return vessel. Any deficit (as was usually the case) between the price of the crop and
that of the European goods was financed by the British merchant and secured on the
planter’s personal bond. The newer commercial, or store-based, system, which
became increasingly prevalent among Glasgow traders after 1750, involved
dispatching factors to America as ‘supercargoes’, or recruited them among the
Scottish emigrants in the colonies. Theyin turn set up stores in the colonies which
purchased tobacco directly and sold European goods to the planters on credit. Title
to the crop passed to the factor on purchase, and all freight and insurance costs for
transportation to Europe were assumed by the store. As in the case of the consignment
system, any deficit incurred by the planter was financed by the British store owner

Figure 27.1 Tobacco ships in America

© Mary Evans Picture Library

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and secured on land mortgages. Planters, both under the consignment and commercial
systems of trade, generally ran credit balances with their British counterparts for at
least 12 months, although store credit generally consisted of numerous small-sized
debts compared to the larger balances run in the consignment trade.
The commercial system became increasingly popular as it proved better suited to
the needs of smaller farmers and planters; by 1775 over three-quarters of Virginia
tobacco were traded under it.29 The reason for this was once again cost: Scottish ships
achieved much quicker turn-around times due to the presence of their affiliated factors
on the spot, who could arrange for the shipment of the produce of the smaller planters
they traded with in more flexible manner than for the case of large consignments.
Shipping to Glasgow rather than London also enjoyed the advantage of a round-trip
that was shorter by four to six weeks, and which followed a route that was mostly
immune to hostile action in case of war, unlike the Channel route typically used by
English importers. Since freight charges could range from a third to a half of the prime
cost of tobacco, the savings achieved by Glasgow merchants were substantial and
allowed them to be much more competitive in the prices they offered to planters.30
The Clyde tobacco boom, and to a lesser extent the growth of other colonial
trades such as sugar, rum, and cotton, gave some impetus to those Scottish industries
which supplied the manufactured goods demanded by the colonies.31 Banking services
also saw increased demand, since tobacco importation through the store system was
a particularly capital intensive business.32 It is estimated that an initial investment of
four times the cost of each hogshead of tobacco was necessary for the store system to
function, not only because of the capital expenditure required in setting up the
network of overseas stores, but also due to the planters running chronic deficits with
their European counterparties. A contemporary estimate put it that £55,000 in goods
and credit needed to be invested for an annual import rate of 2,200 hogsheads, at the
time selling for £6 each.33 These large capital requirements may have been partly
behind the consolidation of the industry to a few large firms, which fell from 91 in
1728–31 to only 38 in 1773.34 Some of these firms, like John Glassford & Co., or the
Buchanan and Cunninghame groups of interconnected partnerships, were large
concerns with tens of established stores in America and turnovers in the hundreds of
thousands of pounds.35
Perhaps paradoxically given the comparative backwardness of its economy,
Scotland’s banks seem to have enjoyed a competitive advantage over the English in
supplying capital for the colonial trades, and longer-term capital at that.36 English
private banks were still restricted to a maximum of six partners under the provisions
of the 1708 Bank of England monopoly, which perforce constrained their assets even
at the usual leverage for this period of 10–12.37 Scottish banks by contrast functioned
under a legal regime that allowed unincorporated partnerships of many persons, and
enjoyed the advantage of operating as a separate legal personality (though not with
limited liability).38 The Royal Bank of Scotland and the Glasgow-based Ship, Arms,
and Thistle banks had all supported the colonial trades at an early stage,39 and the
new Ayr Bank with its large resources and support of prominent landowners,
merchants, and professionals throughout the Lowlands joined them in 1769. The
Ayr Bank has been strongly (but not always justly) criticised by posterity for
incompetent and venal management, and for fanning the flames of a huge credit
bubble.40 Its rapid credit growth supposedly consisted of ‘taking up the bad loans of

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the other banks’41 and funding ‘every kind of social pretention’,42 while its excessive
paper money issuance was maintained by precarious short-term money market loans
in London. Part of this credit was directed towards the purchase of sugar plantations
in the Ceded Islands in the Caribbean, recently won from the French in the Seven
Years War, particularly in Grenada where William Alexander & Sons, a major
Edinburgh tobacco and banking concern, and the Home family from Berwickshire
acquired plantations.43 Both were to feature prominently in the aftermath of the 1772
crisis, albeit in different capacities: George Home of Branxton became the factor and
manager overseeing (and, happily for posterity, meticulously recording) the unwinding
of the Ayr Bank after 1773, while the surviving partners of Alexanders and their two
large estates in Grenada were involved in long and bitter litigation with the Bank of
England that took decades to resolve.44
When the non-importation agreements broke down in 1770, the tobacco trade
intensified to compensate for the time it had been restricted, aided no doubt by the
boom conditions in Britain. Sources agreed than an ‘amazingly great’ volume of
goods was shipped from the mother country in 1771, and realised that the balance of
trade, always in deficit from the point of view of planters, was turning even more
against them.45 Official estimates (which do not necessarily correspond to commercial
values) put this deficit at £2.6 million in 1771 and almost £1.5 million at the time of
the crisis in 1772. Total American debts outstanding just before the Revolution are
estimated between £2–6 million. R. B. Sheridan estimates a possible figure of as high
as £4–5 million for the peak of the boom, assuming a natural retrenchment of credit
following the crisis in 1772.46
All tobacco merchants, whether Scots or English (or indeed, American),
consignment- or store-based, and whatever their sources of capital, depended on the
City of London for effecting their fund transfers. The bill of exchange drawn on
London or Amsterdam bankers (and, increasingly, on aggressive Scottish newcomers
like the Ayr Bank) was the long-established cornerstone of international trade in this
period, allowing the fast and safe transfer of funds without the risk and expense of
transporting specie, even had specie been abundantly available – which was far from
the case.47 Tobacco factors either drew or purchased existing London or Scottish
bills, using either cash or – far more frequently – local paper money, and remitted
those to their British parent companies. The inherent transferability of bills, by means
of serial endorsements, made them convenient and somewhat mitigated their cost.
This was invariably high: the structural deficits of the tobacco trade for the Americans,
together with the scarcity of specie and the fact that American paper money issues in
all their great variety, and (all too often) their inflationary disrepute, were not readily
accepted by British merchants, drove demand for London bills ever higher – typically
between 25–33 per cent in premium.48 Going beyond cost, the bills system also
introduced an extra dimension of credit risk to the transaction between exporter and
importer, should any doubt befall the security of the London or Scottish banker who
had ‘accepted’ (i.e. guaranteed) the bill.
Much has been made of the practice of drawing ‘fictitious’ bills during the 1770–72
boom, ever since Smith’s analysis of the Ayr Bank failure in the Wealth of Nations.
These were fiat financial instruments that did not correspond to real underlying
commercial transactions, and which were often redrawn just before maturity so that
the short-term loan (bills typically ran for 50–70 days) could be extended for a longer

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duration.49 Fictitious bills were certainly used heavily in Europe, particularly in

effecting so-called ‘accommodation loans’, a form of interbank loan that made use of
a bill drawn and accepted by established bankers in the major money markets like
London or Amsterdam. This was not an innovation particular to this period, but long-
established practice in the absence of a modern interbank market, nor was 1772 the
first time such loans had been associated with a serious financial crisis.50 Sources are
nonetheless almost uniform in asserting that the practice had exceeded previous
experience in 1772, particularly when Scottish bills were concerned. The bills employed
in the tobacco and other colonial trades were very much ‘real’ however, supported by
a voluminous trade in real commodities. Indeed, the very fact that the booming colonial
trade created so many genuine bills which could be also used as a monetary instrument
may have even fed the financial boom, by providing increased quantities of the very
instrument that was its signature.
Although the preceding discussion has focused on the bilateral trade between
colonies and mother country, not all commerce was conducted in this fashion, just as
not all pre-1772 American debts were owed to British counterparties. Indeed, the
case has been made that internal American debts outnumbered those owed to
Britons.51 Colonist merchants were already making their presence felt, trading directly
either with the West Indies or with southern European countries, and participating in
the tobacco and other colonial trades in their own account. Such ‘cargo traders’ were
often based in the ‘semi-open and commercially active…northern provinces’,52 which
were not as tightly integrated with Britain as the southern colonies with their staple
crop based economy operating under the restrictive colonial regime established by
the Trade and Navigation Acts. They were however as dependent on the London
money markets for their operations, since bills of exchange were the standard
instrument through which their cash flows could be affected. This exposed them to
the availability of short-term credit there, binding them to the British financial nexus
as strongly as the southern planters with their large capital needs and chronic trading
deficits with Britain.

THE IMPACT O F THE 1 7 7 2 – 7 3 CRIS IS

ON TRANS ATL ANTIC F INANCE
Contemporary press reports and correspondence described an emotional outburst in
the market and society at large when the crisis broke out. ‘Public calamity’, ‘tragedy’,
‘catastrophe fatal to thousands’, ‘horror and confusion’, are some of the statements
found in only one London newspaper report.53 David Hume talked of ‘universal Loss
of Credit and endless Suspicions’ in Edinburgh,54 while the Scots Magazine reported
the ‘whole city [of London] in uproar, and many of the first families in tears’. The
same correspondent warned of suicides arising from this sense of desperation, and
lurid tales indeed abounded in the press for a time, describing merchants cutting their
own throats, shooting or hanging themselves, not to mention the by now proverbial
jumping out of a ‘window in agony of mind arising from the failure of the Bankers’.55
Such reports were not entirely fantasy either: the younger Robert Bogle of the London
Scottish tobacco house Bogle & Scott did jump out of the proverbial window ‘in a
phrenzy’ when his firm stopped payment – although he survived.56 Those involved in
the colonial trade on both sides of the Atlantic quickly joined this chorus of alarm.

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Even if he was by then somewhat calmer, the aforementioned Bogle repeated a few
months later the exaggerated claim that ‘the South Sea affair was a trifle to what has
now happened’ that was also appearing in the press.57 George Norton of the large
John Norton & Sons tobacco concern was typical in stating that ‘were [he] to recount
the many Catastroph’es that have happen’d & the many families reduced to want &
Beggary [he] should fill a volume of Incidents’.58 Joshua Johnson of the London and
Maryland tobacco trading firm of Wallace, Davidson & Johnson estimated the
situation in almost the identical phrasing as Hume: ‘the breaking of Fordyce & Co.
bankers has stagnated business; every man seems afraid of each other’.59
Such reactions are all too often described as ‘panic’ in the literature, sometimes even
‘spreading panic’, implying contagion of some sort.60 It can also be argued, however, that
the reactions of at least some market participants were in fact all too rational in view of
the sudden change in market circumstances. The revelation of previously unavailable
information can lead market participants to reassess their risk accordingly, even to the
point of resorting to capital flight, forced asset liquidations, or the denial of new credit.61
This ‘informational contagion’ presumes an imperfect information regime where ‘the
costs of acquiring and processing [market] information make a correct assessment of
fundamentals difficult and a certain degree of ignorance rational’,62 a not altogether
unreasonable assumption for the eighteenth-century British financial network. The
‘wake-up call’63 that can set off the contagion sequence in motion may be the outright
failure of a market player who is considered systemically inportant (like Fordyce or the
Ayr Bank), an increase in the rate at which bills are dishonoured or protested, or merely
the suspicion that the behaviour of the financial establishment has altered drastically. In
June 1772, it was not just that Fordyce was rumoured to have been deeply committed in
the bills trade and in Alley speculations, but that his failure was attributed by many to
ongoing – though unsubstantiated – rumours that the Bank of England was refusing to
discount bills drawn by Scots and Amsterdam Jews. 64 The very fact that the Scot Fordyce
had absconded could have been seen as proof of such a policy change, even if – as is more
than probable – this never took place in reality.65 The rate at which bills were protested
certainly rose during the crisis to perhaps as high as 25 per cent,66 and complaints about
the Bank of England’s discount policy continued both in Britain and on the Continent.67
Any new knowledge that existing bills were being dishonoured by their drawers, or that
new bills were being returned protested from their acceptors, or that the ultimate
discounting power in the country was choosing to refuse them, could thus very rationally
lead market participants to restrict their bills acceptances, or to call in what outstanding
loans they could. Eight months after the breakout of the crisis, and after the January
wave of stoppages in Holland had dealt a new blow to the bills of exchange network,
Joshua Johnson described himself ‘trembling with fear’ lest more houses stop

for, if they do, we most surely must have many more of our bills returned [i.e.
protested] than is at present, and the quantity already is so great that I know not
what to do about it. The Bank continues not to discount and they have by that
means distressed the whole mercantile body and, unless they relapse soon, I fear
the whole nation will become a bankrupt.68

Suspicion could encompass whole classes of market participants, assigning to them

guilt by mere association. No other category in 1772 was suspected or publically

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excoriated more than the Scots, who had already been the subject of a virulent
campaign in the Wilkite press for some years. As Walpole put it,

As [Fordyce] is a Scotchman, and as the Scots have given provocation even to the
Bank of England, by circulating vast quantities of their own banks’ notes, all the
clamour against that country is revived, and the war is carried very far, at least
in the newspapers.69

Resentment at this ‘deluge of Scotch paper for English gold’ went beyond letters in
the press or satirical prints.70 The concurrent failures of other Scottish bankers in
London like Fordyce, Grant & Co. and Charles Ferguson & Co. led to general
consternation about the quality of Scottish bills, particularly as ‘the foundation of
them [was] very little understood, though of late much the topic of conversation’.71
The stoppage of the Ayr Bank made such fears even more acute, although the bank
eventually managed to fend off bankruptcy and satisfy drafts on it through the
(ultimately ill-advised) issuance of £450,000 in life annuities.72 John Norton
specifically warned that he was ‘credibly inform’d that Virginia Bills drawn payable
in Scotland are now discharged by drafts on the Heron & Douglas Bank which lately
stopt, for which reason those who purchase Bills ought to be carefull of whom’.73
Johnson similarly cautioned his American correspondents to take particular care in
purchasing any bills of exchange that might be tainted from any Scottish connections:

It is hardly doubted that all your Scotch factors will be knocked up. I recommended
to you caution in the last [letter] respecting the purchase of Scotch bills, but now
let me beg of you not to have anything to do with them at any rate, for I assure
you I am very doubtful of the ones I have by me will [be protested]; indeed no
one will do anything with them; they are all so frighted, and I assure you that it
is not only my opinion but everyone’s else that there will be a total bankruptcy
with the Scotch in most countries. 74

There are indications that some transatlantic traders curtailed their trading activities
in the face of the crisis. The large W. Cunninghame & Co. Scottish concern explicitly
declared on 19 August the company’s ‘fixed resolution to adopt a new plan in carrying
on their business more frugally…as they are morally certain that there will be but few
goods imported into the colony [of Virginia] next year’. They accordingly warned
their factors that they should expect ‘very scanty supplies next year’ and urged them
to clear their inventories of goods. They furthermore instructed them to ‘have more
dependance on receiving payment of [their] debts’, and restricted the leverage of their
stores by limiting their ability of drawing bills on the parent company without first
remitting a fraction of the face value of the bill in cash.75 This restriction varied
according to store location: from a leverage factor of 4 to 5 for their Rappahannock
and Potomac stores, to 3–4 for the ones at Cabin Point and Petersburg, to only 2 or
at most 3 for those at Shockoe and Rocky Ridge.76 In general, the Cunninghame firm
showed much hard-headedness in responding to the crisis, despite paying lip-service
to the usual hyperbole about ‘amazement, terror, astonishment, and suspicion [being]
visible in every countenance’. In the same letter quoted above, they showed no little
schadefreude in stating that though

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the shock must have been terrible, it will show who has and who has not a
foundation and will make everyone be much more on their guard in what manner
they trade beyond their bottom.

One of the Cunninghame representatives in America echoed this frustration at what

he viewed as the excesses of the boom and the incursions of independent traders, by
declaring himself

happy if this shock to credit has an effect to the advantage of the trade of this
colony. If fewer goods are imported, fewer will trade on their own account and
the advance of course may be increased.77

Such informational and behavioural effects aside, contagion can also be transmitted
through strictly financial connections.78 The most obvious way this can occur is
through dishonoured debts, leading to cascading defaults as more debts are
dishonoured in turn.79 It is not very likely that such a direct route was a major factor
in 1772, despite the large American debts due to British merchants. As mentioned
above, most of those arose from the trading deficits of planters, and there had always
been the option of discharging them by supplying staple commodities like tobacco
instead of cash. Credit exposures arising from bills of exchange were a more serious
matter, however. Bills were short-dated, generally running from 50 to 70 days and
never longer than three months, and the bill holder in fact had a claim upon multiple
counterparties, thus obscuring the credit risk picture. Not only was the original
drawer and acceptor of the bill liable for its face value, but so were also any endorsers
who might have signed on the bill in its path to the ultimate creditor’s hands. This
multiplicity of claim entitlement could rapidly transmit financial distress, as merchants
were unsure whether they would be called upon for repayment of bills they had
drawn, accepted, or endorsed to counterparties. Johnson’s letters to his American
factors frequently listed firms or persons who might be under a cloud of suspicion, or
were already having their drafts protested in London, along with warnings against
purchasing any bills that might be tainted by association, since

almost every merchant notes the bills drawn on them, so that it requires you use
the utmost caution on your parts that you have good endorsers to those bills
you purchase.80

Bills on London, Edinburgh, or Amsterdam were also held as liquid assets due to the
chronic dearth of cash on both sides of the Atlantic. These were either sold on,
discounted for cash, or remitted in payment of other debts, including other bills. The
stoppage of any of the signatories on a bill could very easily drive its value downward,
leaving the current holder with a sharply devalued (or worthless) asset.
Such distress did not necessarily lead to bankruptcy, at least not immediately. The
numbers of British bankruptcy commisions instituted in 1772 did rise appreciably, in
fact reaching the highest level since 1706 and would only be surpassed again in the
war year of 1778.81 The size of the proven debts for the major failures of 1772 was
likewise very substantial.82 In general however, comparatively few participants in the
trade went immediately bankrupt in a way that would cause the cascading defaults

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that would be evidence of financial contagion. Among tobacco traders only the
London Scottish house of Bogle & Scott and their correspondents Simpson, Baird, &
Co. went bankrupt during the June crisis, and there were no notable bankruptcies
among the big warehousemen who supplied the transatlantic trade with goods.83 The
only equivalent in America was the stoppage of an unnamed Carolina house
mentioned by Joshua Johnson, though whether it actually went bankrupt or not is
not specified.84 A second wave of failures coincided with the January 1773 Amsterdam
crisis and continued all through the year. This time several big tobacco houses
stopped, including some of the prominent Buchanan interlocking partnerships.85
Others resisted longer before finally succumbing: William Alexander & Sons, who
were connected with such central players of the crisis like the London private bank
of Glyn & Hallifax as well as the Ayr Bank, received two large rescue loans from the
Bank of England for a total of £220,000, and were the beneficiary of a further
favourable – and contentious – loan from the Ayr Bank for £10,000 in 1774, as well
as of another £5,000 in loan guarantees by no less a figure than Benjamin Franklin.
Even so, they could not avoid eventual bankruptcy and long litigation over the
family’s estates in Grenada, before their last surviving partner eventually absconded,
first to France, and finally the newly independent United States.86
Most debt cases took years to resolve, and in extreme cases like that of the Ayr
Bank, decades. During that time other factors came into play, topmost of all of course
being the rapidly deteriorating political situation culminating in the Revolution. R. B.
Sheridan has tried to extract some information specific to the financial crisis from the
Loyalist Claims Commission documents, while a write-down of £15,000 in the 1786
Ayr Bank balance sheet was attributed to Hamilton & Co. and Simon Brown, all of
whose assets were in America.87 In all cases however, it is difficult to distinguish
which effects were due to the financial crisis and which to the political situation. In
any event, bankruptcy was only the final resort for creditors. More often than not,
debtors would open their books and try to come to some accommodation with
creditors, either continuing operations in the meantime, or agreeing to an orderly
wind-up. In some cases credit was extended over the crisis period until liquidity was
reestablished, and in others debtors and creditors agreed to a composition, that is the
payment of a fraction of the debts. Johnson’s letterbook goes into some detail about
this process, both concerning his company and also the arrangements of other
troubled merchants. The timing of such a proposal was particularly crucial in view of
the shaky confidence prevailing in the markets. Johnson described this dilemma in
responding to such a proposal by his associates:

You certainly don’t recall the injury it has done many houses in raising a suspicion
of their goodness or you would not have advised it…If we are to preserve the
reputation of the house, I must by no means [call my creditors together to
demonstrate our security is good]; that I was subject to be arrested and might be
threw in gaol from the present exceeding ill temper amongst the tradesmen.88

Tobacco merchants trading under the store system were much more susceptible to
mechanical contagion compared to those still operating under the old consignment
one, since they depended on bills for effecting their remittances to their British
creditors. Independent American ‘cargo traders’ operating outside both systems were

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even more vulnerable, since they could neither benefit from long-term store credit,
nor supply tobacco in part payment of their debts. Any disruption to the bills of
exchange network could be instant and fatal for them, as would any retrenchment on
the part of their London correspondents on whose short-term credit their solvency
depended. By contrast, the greatest hardship those operating under the consignment
system might encounter was a straightforward scarcity of capital. This might prevent
them from purchasing more land and slaves to expand production, but would not
pose an immediate threat to their solvency.
On the other hand, large planters were much more worth pursuing in court by
their creditors, unlike stores who were typically owed numerous and individual small
debts. For instance, the £63,000 owed to John Norton & Sons in 1773 arose from
398 distinct debts.89 Table 27.1 shows the distribution of debts due to two stores in
Port Royal and Fredericksburg by the failed Bogle & Scott firm. Close to half of the
almost £9,000 owed arose from four comparatively large debts over £500, the largest
of which was for a little over £1,700. These debts would have been worth pursuing.
Another 14 debtors owed between £100 and £500 a total of about a third of the
outstanding store debt. The remaining 15 per cent arose from 41 small debts whose
originators would very likely have been safe from being pursued in court, and who
could always move to the interior of the vast country if hard pressed. Indeed, one
reason for the comparatively conciliatory attitude on the part of creditors was that
the collection of debts in America posed major challenges. There had never been
enough cash in the colony in the first place, and the disruption in the bills market
removed the most ready alternative for making remittances to Britain. Payments in
kind were still possible of course; the sugar from the Grenada plantations of William
Alexander & Sons was explicitly used to service their large Bank of England rescue
loans, and later became a major bone of contention in the laborious litigation
involving them.90 Tobacco could be used in the same way, although the glut caused
by the bumper harvest reduced its usefulness in that respect.
Between the recovery of debts that would have been normally carried forward by
the stores before the crisis, remittances in support of drawn bills of exchange, and the
repatriation of specie to Britain by merchants who needed to support their credit
there, there was a sudden drain of cash out of the colonies. One contemporary put
the total amount of cash shipped out of the country at £100,000 for the nine months

Table 27.1 Debt distribution of Port Royal and Fredericksburg stores of Robert and
Robert Bogle and William Scott, 22 June 1772

Number of debts Total owed (£)

Below £20 15 195

£20 - £50 16 468
£50 - £100 10 716
£100 - £500 14 3,453
£500 - £1,000 2 1,209
over £1,000 2 2,952
59 8,994
Source: RBS SPS/12

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preceding June 1773.91 The discount in the rate of exchange between sterling and
local currency rose from 20 to 30 per cent between October 1771 and May 1773,
both due to this cash drain and the bidding up of the increasingly scarce good bills of
exchange. Nevertheless, the colonial economy had been accustomed to specie
shortages, as indeed was the British one as well. It is far more likely that the disruption
in the bills of exchange market affected business more seriously than the removal of
£100,000 of specie.

EFFECTS ON OVERA L L TRANS ATL ANTIC B U S INE S S

AND THE QUE S TIO N O F CO NTAG IO N
It is not easy to establish whether the transmission of the British credit crisis to
North America caused appreciable negative effects on overall business.There are no
reports that the underlying demand of colonial commodities fell in Europe. Tobacco
prices remained comparatively low throughout the crisis years of 1772–73, but that
was more a result of five straight bumper crops starting in 1770.92 At first glance,
trade figures for England and Scotland as shown in Tables 27.2 and 27.3 do seem
to indicate that transatlantic trade contracted due to the crisis. Volumes of imported
tobacco fell more significantly for English importers than for Scottish ones (a fall of
11.5 per cent and 4.3 per cent year-on-year respectively). This apparent resilience
of the Glasgow traders, despite the involvement of prominent Scots bankers in the
crash, has been attributed to the fact that a large part of their re-exports were
directed to French customers who paid in cash, unlike thosee Hamburg or
Amsterdam customers of the English who instead relied on the bills market. Scottish
exports to France had risen by almost 69 per cent by volume of merchandise, from
12 million lbs in 1771 to over 20 million lbs in 1772, and remained over 21 million
lbs the following year.93 Even the much smaller English tobacco exports to France
jumped from 1771 to 1772, and although they retreated somewhat in 1773,
remained at much higher levels than previously. There also remains the possibility,
that the apparent drop in overall imports in the crisis year is either an artifact of the
way the annual figures were collated, or of the clearing of inventories after the
record imports of 1771. In fact, English tobacco imports more than cancelled this
apparent drop with a rise of 12.4 per cent in the following year, while Scottish
imports remained largely stable at their new slightly lower levels. Over the whole
1772–73 period therefore, overall tobacco imports remained broadly stable though
somewhat below the 1771 all-time peak, while British exports to France stayed at
record levels. Similarly, English sugar imports from the West Indies (Scottish sugar
imports were dwarfed by comparison and are not as relevant) show a small year-
on-year drop of 2.4 per cent for 1773, but then resume their strong upward trend
they were on since 1765. Data for arrivals of British flagged slaving ships to the
Caribbean underline this picture (Table 27.4), showing a very small drop for 1772
before recovering strongly in 1773. In all cases, what impact the financial crisis
may have had on the volume of colonial trade is dwarfed by that of the war that
was to break out only three years later. Tobacco imports completely collapsed to
virtually zero then, never to recover again for the case of the Glasgow merchants,
while the sugar and slave trades were also disrupted, particularly after the French
capture of Grenada in 1779.

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Table 27.2

Sources: (1) English data: Elizabeth Boody Schumpeter, English Overseas Trade Statistics
1697-1808 (Oxford, 1960), Tables XVI and XVII
(2) Scottish data: Henry Hamilton, An Economic History of Scotland in the Eighteenth
Century (Oxford,1963), Appendix IX

Table 27.3

Source: Elizabeth Boody Schumpeter, English Overseas Trade Statistics 1697-1808 (Oxford,
1960), Tables XVI and XVII

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Table 27.4

Source: Voyages: The Trans-Atlantic Slave Trade Database. http://www.slavevoyages.org

(accessed March 28, 2014).

There is stronger evidence from wholesale commodity prices for Charleston, that
have the further advantage of a finer data set than the annual totals of the import
data.94 These show an unequivocal peak just before the crash month of June 1772,
following an almost steady rise since 1770. After the crash, prices fell by almost 30
per cent, and despite some volatility never regained the same peaks throughout the
last three years of peace.
It is nonetheless difficult to depend on such aggregate figures as an explicit indicator
of the effects of the financial crisis, and certainly not as evidence of contagion
according to the specific definition Contagious relationships between the American
colonies and the distressed European money markets are certainly plausible, but the
surviving evidence is sparse. Capital repatriation to Britain on the part of distressed
traders is an appealing hypothesis, but there is at present little archival evidence to
corroborate it. It is far more likely that the disruption in the bills market transmitted
financial distress more decisively than the removal of even £100,000 in specie.
Furthermore, there are other possible explanations for the difficulties faced by
tobacco traders after 1772. The great surge in imports on both sides of the Atlantic
that followed the normalisation of trade in 1770 may have been followed by a
correction to more sustainable levels as built-up inventories were cleared. Moreover,
the tobacco glut in Europe depressed prices by itself, thus worsening the chronic
deficits of planters, and made it difficult for British importers to keep extending ever
higher credit by supplying the same quantities of goods as in the peak year of 1771.
In general terms too, 1772 paled in comparison with the economic dislocation that
was to follow as political friction between mother country and colonists worsened
into rebellion, and eventually into European war.
That said, we should not altogether dismiss the effects of the crisis on the
transatlantic trading network, even if we remain sceptical of contemporary hyperbole

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which builds it up to an unprecedented disaster. The level of financial integration and

sophistication of the international financial network in 1772 was such as to to make
the contagious transmission of the crisis both plausible and serious. Contemporaries
certainly thought as much, stressing that ‘such [were] the connexions of trade that the
English could not feel complacent about the distress of Scottish bankers’,95 and that
‘the failure of a great house in another country is very little different to a failure in
our own’.96 No other contemporary reaction underlined such fears better than the
speed and decisiveness with which the Bank of England intervened to interpose the
‘shelter of the Castle of Public Credit’ to protect the financial system from the storm,97
even if the first theoretical expression of the concept of the Lender of Last Resort still
lay three decades in the future.

NO TE S
1 London Evening Post, June 9–11, 1772. Jacob M. Price, ‘Fordyce, Alexander (bap. 1729,
d. 1789)’, DNB: 9876.
2 Bingley’s London Journal, September 5–12, 1772.
3 Scots Magazine, XXXIV (1772), p. 311.
4 Henry Hamilton, ‘The Failure of the Ayr Bank, 1772’, Economic History Review 8 (1956),
405–17.
5 Charles Wilson, Anglo-Dutch Commerce and Finance in the Eighteenth Century (Cambridge,
1941), 169–88.
6 Lucy S. Sutherland, ‘Sir George Colebrooke’s World Corner in Alum, 1771–73’, Economic
History: A Supplement to the Economic Journal III (1934), 237–58.
7 Lucy S. Sutherland, The East India Company in Eighteenth Century Politics (Oxford, 1952),
222–29.
8 Horace Walpole, The letters of Horace Walpole: earl of Orford, Volume 5 (P. Cunningham,
ed.) (London, 1891), 395–96.
9 James Boswell, Reflections on the Late Alarming Bankruptcies in Scotland. (Edinburgh,
1773), 1.
10 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Oxford,
1976) (hereafter: WoN), II.ii.73–77. S. G. Checkland, ‘Adam Smith and the Bankers’, in
A. S. Skinner and T. Wilson, eds., Essays on Adam Smith (Oxford, 1975), Hugh Rockoff,
‘Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking’,
Journal of Cultural Economy, 4, 3 (2011), 255–83.
11 Julian Hoppit, ‘Financial Crises in 18th Century England’, Economic History Review 39,
1 (1986), 39–58. Jacob M. Price, France and the Chesapeake; a history of the French
tobacco monopoly, 1674–1791 (Ann Arbor, 1973), 639.
12 Sir William Forbes, Memoirs of a Banking-House (London and Edinburgh, 1860), 39–44,
Scots Magazine (hereafter SM) XXXIV, 304–18.
13 London Evening Post, 18–20 June 1772.
14 Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great
Britain (London, 1802).
15 Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises (New
York, 2000), 162.
16 Fernand Braudel, Civilization and Capitalism 15th–18th Century, Vol. 3 (Berkeley, 1992),
268–69.
17 Jacob M. Price, ‘The Rise of Glasgow in the Chesapeake Tobacco Trade, 1707–55’,
William and Mary Quarterly, 3rd ser., 11 (1954) 179–99, Capital and Credit in British
Overseas Trade: The View from the Chesapeake, 1700–1776 (Boston [Mass.], 1980).

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T. M. Devine, ‘Glasgow Merchants and the Collapse of the Tobacco Trade, 1775–83’,
Scottish Historical Review, 52, 153 (1973), 50–74, ‘Sources of Capital for the Glasgow
Tobacco Trade, c. 1740–80’, Business History, 16, 2 (1974), 123–29. Richard B. Sheridan,
‘The British Credit Crisis of 1772 and the American Colonies’, Journal of Economic
History, 20 (1960), 161–86.
18 Sheridan, ‘The British Credit Crisis of 1772’, p. 186.
19 Emory G. Evans, ‘Planter Indebtedness and the Coming of the Revolution in Virginia’,
William and Mary Quarterly, 3rd ser., 19 (1962), 511–33.
20 For instance Sheridan, ‘The British Credit Crisis of 1772’, p. 172 (on two occasions),
Kindleberger, Manias, Panics, and Crashes, p. 124.
21 This definition is adapted from Olivier De Bandt and Philipp Hartmann, ‘Systemic risk in
banking: a survey’, in Charles Goodhard and Gerhard Illing (eds.), Financial Crises,
Contagion, and the Lender of Last Resort (Oxford, 2002), 249–97. This review article is
in general a good starting point for approaching the vast literature on this subject.
22 Smith, WoN, II.ii.57.
23 For instance Sheridan, ‘The British Credit Crisis of 1772’, p. 172, Price, Capital and
Credit, p. 131, Julian Hoppit, Risk and Failure in English Business 1700–1800 (Cambridge,
1987), p. 99.
24 Hoppit, Risk and Failure, p. 134.
25 Henry Hamilton, An Economic History of Scotland in the Eighteenth Century (Oxford,
1963), 255–56.
26 Price, France and the Chesapeake, pp. 608–9.
27 Hamilton, Economic History, p. 259.
28 Sheridan, pp. 168–71, J. H. Soltow, ‘Scottish traders in Virginia, 1750–1775’, Economic
History Review, 12, 1 (1959), 83–98.
29 Sheridan, ‘The British Credit Crisis of 1772’, p. 169.
30 Hamilton, Economic History, p. 259. Price, ‘Rise of Glasgow’, 187–90.
31 T. M. Devine, ‘The Colonial Trades and Industrial Investment in Scotland, c. 1700–1815’,
Economic History Review, 29, 1 (1976). 1–13. Hamilton, Economic History, p. 262.
32 Price, Capital and Credit, p. 124.
33 Devine, Sources of Capital, pp. 116–17.
34 Hamilton, Economic History, p. 266.
35 Soltow, p. 85, Hamilton, Economic History, p. 266.
36 Devine, Sources of Capital, p. 116.
37 Examples include Barclays (Barlcays Group Archives [BGA] 364/1–40 &78–84), the
Bristol Old Bank, and its London correspondent, Prescott Grote (Royal Bank of Scotland
Archives (RBS) MCB/1/1 and PRE/263).
38 R. H. Campbell, ‘The Law and the Joint-stock Company in Scotland’, in P. L. Payne, ed.,
Studies in Scottish Business History, 136 (1967), 137–5. Charles W. Munn, The Scottish
Provincial Banking Companies, 1747–1864 (Edinburgh, 1981), 5–6.
39 Price, France and the Chesapeake, 607–8, Capital and Credit, 63–95.
40 Smith, WoN, II.ii.73–77. Committee of Inquiry appointed by the Proprietors, The
Precipitation and Fall of Mess. Douglas, Heron, and Company, Late Bankers in Air with
the Causes of their Distress and Ruin, Investigated and Considered (Edinburgh, 1778).
41 Kindleberger, Manias, p. 44.
42 Wilson, Anglo-Dutch Finance, p. 171.
43 National Archives of Scotland (NAS), Home-Robertson papers, GD267/1–4.
44 NAS, Court of Session papers, William Alexander vs Creditors of William Alexander:
Sequestration; Proceedings in England, CS181/6942.
45 Quoted in Sheridan, ‘The British Credit Crisis of 1772’, p. 173.

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46 Sheridan, ‘The British Credit Crisis of 1772’, p. 166, Devine, Sources of Capital, p. 117.
Lawrence H. Gipson, ‘Virginia Planter Debts before the American Revolution’, Virginia
Magazine of History and Biography, 69, 3 (1961), 259–77.
47 T. S. Ashton, An Economic History of England: The 18th Century (London, 1955), p. 186,
Neal, pp. 5–9.
48 Roger W. Weiss, ‘The Issue of Paper Money in the American Colonies, 1720–74’, Journal
of Economic History, 30, 1 (1970), 770–84.
49 For Smith on the Law of Reflux and the Real Bills Doctrine see David Glasner, ‘The Real Bills
Doctrine in the Light of the Law of Reflux’, Lloyd W. Mints, A History of Banking Theory
in Great Britain and the United States (Chicago, 1945), 9–30, Morris Perlman, ‘Adam Smith
and the Paternity of the Real Bills Doctrine’, History of Political Economy, 21 (1989), 77–90.
50 Isabel Schnabel and Hyun Song Shin, ‘Liquidity and Contagion: The Crisis of 1763’,
Journal of the European Economic Association 2, 6 (2004), 929–68. Stephen Quinn and
William Roberds, ‘Responding to a Shadow Banking Crisis: The Lessons of 1763’, Federal
Reserve Board of Atlanta Working Paper Series, 2012–18 (2012).
51 A. C. Land, ‘Economic Behavior in a Planting Society’, Journal of Southern History, 33
(1967), 479.
52 Sheridan, ‘The British Credit Crisis of 1772’, p. 168. Price, Capital and Credit, pp. 127–29.
53 Middlesex Journal, July 2–4, 1772.
54 David Hume to Adam Smith, 27 June 1772, The Correspondence of Adam Smith (Oxford,
1977), p. 162.
55 Morning Chronicle, June 24, 1772, Bingley’s London Journal, July 4–11, 1772, London
Chronicle, November 17–19, 1772, General Evening Post, July 2–4, 1772, Sheridan, ‘The
British Credit Crisis of 1772’, p. 176.
56 RBS GM/1357, Robert Oliphant to William Putney, 22 June 1772. Robert Bogle Jr. to
George Bogle, London, November November 19, 1772, quoted in Price, France and the
Chesapeake, p. 640. Frances Norton Mason (ed.), John Norton & Sons, Merchants of
London and Virginia (hereafter: Norton letterbook), p. 254 George F. Norton to John
Hately Norton, July 8, 1772.
57 Bogle letter quoted in Price, France and the Chesapeake, op. cit.
58 Norton letterbook, op. cit.
59 Jacob M. Price (ed.), Joshua Johnson’s Letterbook, 1771–1774 (hereafter: Johnson
letterbook) (London, 1979), 41d, 22 June 1772, p. 40.
60 For instance, Hoppit, ‘Financial Crises’, p. 54, Sheridan, ‘The British Credit Crisis of
1772’, p. 172, Price, France and the Chesapeake, p. 639 and Capital and Credit, p. 131.
61 Mervyn King and Sushil Wadhwani, ‘Transmission of Volatility between Stock Markets’,
Review of Financial Studies, 3 (1990), pp. 5–33, Matt Pritsker, ‘The Channels for
Financial Contagion’, pp. 67–97 in S. Claessens and K. Forbes (eds.), International
Financial Contagion (Boston, 2001).
62 Thomas Moser, ‘What is International Financial Contagion?’, International Finance, 6, 2
(2003), 157–78.
63 Morris Goldstein, The Asian Crisis: Causes, Cures, and Systemic Implications
(Washington, 1998), 18.
64 Middlesex Journal, 3–6 September 1772, Bingley’s Journal, 6–13 June 1772, General Evening
Post, 20–23 June 1772, NAS GD44/43/70/7, James Balfour to James Ross, 21 July 1772.
65 The only documented change in Bank official policy is a 13 May 1773 resolution to
increase the discount rate on foreign bills to 5 per cent, starting on 24 June that year, that
is a year after the crisis broke out (BOE, Extracts from court minutes relating to discounts,
G29/1, fo. 6).
66 Price, Capital and Credit, p. 132.

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67 For instance Anonymous, Réflexions sur les dernieres banqueroutes en Anglettere &
Hollande, et conduite du Ministere Anglois à ce sujet (pamphlet claiming to be printed in
London, 1773). Bogle letter quoted in Price, France & Chesapeake, op. cit. NAS
GD267/22/7/57, George Home to Patrick Home, 29 June 1772.
68 Johnson letterbook, 61, 5 February 1773, p. 59.
69 Horace Walpole, The Letters of Horace Walpole: Earl of Oxford, Volume 5 (P. Cunningham,
ed.) (London, 1891), 395–96.
70 F. G. Stephens and M. D. George, Catalogue of Political and Personal Satires in the
Department of Prints and Drawings in the British Museum (London, 1870), ‘A view of the
Deluge of Scotch Paper Currency for English Gold’, anonymous satirical print, 1 August 1772
(BM Satires 4961).
71 Scots Magazine, XXXIV, 313.
72 Lloyds Group (Bank of Scotland) Archives, NAS945 20/30/3.
73 Norton letterbook, John Norton to john Hately Norton, 6 August 1772, p. 266.
74 Johnson letterbook, 42, 1 July 1772, pp. 40–41.
75 T. M. Devine (ed.), A Scottish firm in Virginia, 1767–1777, W. Cunninghame and Co.
(hereafter: Cunninghame letterbook), to J. Neilson, 19 August 1772, p. 58.
76 Cunninghame letterbook, as above.
77 Cunninghame letterbook, to Messrs W. Cunninghame & Co. per the Nelly, Capt. Brown,
22 August 1772, p. 88.
78 Franklin Allen and Douglas Gale, ‘Financial Contagion’, Journal of Political Economy,
108, 1 (2000), 1–33.
79 Philippe Jorion, and Gaiyan Zhang, ‘Credit Contagion from Counterparty Risk’, Journal
of Finance, 64, 5 (2009), 2053–87, David Marshall, ‘Understanding the Asian crisis:
Systemic risk as coordination failure’, Federal Reserve Bank of Chicago, Economic
Perspectives, 22 (1988), 13–27.
80 Johnson letterbook, 47a, 20 August 1772, p.45 and 52a, 7 October 1772, p. 49.
81 Hoppit, Risk and Failure, Appendix I, 182–83.
82 Paul Kosmetatos, ‘The winding-up of the Ayr Bank, 1772-1827’, Financial History
Review, FirstView Article (July 2014), p. 23, table 7.
83 Price, Capital and Credit, p. 135.
84 Johnson letterbook, 41e, 22 June 1772, p. 40.
85 Sheridan, ‘The British Credit Crisis of 1772’, p. 177.
86 Price, France and the Chesapeake, p. 693–700.
87 NAS GD224/178/8.
88 Johnson letterbook, 83a, 28 June 1773, p. 80, and 86, 30 June 1773, p. 83.
89 Norton letterbook, p. 293.
90 NAS CS181/6942, William Alexander & Sons, sequestration proceedings in England,
NAS CS222/278, sequestration proceedings in Scotland.
91 Sheridan, ‘The British Credit Crisis of 1772’, pp. 175, 178.
92 Price, Capital and Credit, p. 130.
93 Price, France and the Chesapeake, pp. 641–43.
94 George Rogers Taylor, ‘Wholesale commodity prices at Charleston, South Carolina,
1732–91’, Journal of Economic and Business History IV (1932), 366–77, quoted in
Sheridan, ‘The British Credit Crisis of 1772’, pp. 174–75. Note also Sheridan, ‘The British
Credit Crisis of 1772’, p. 174n, for further price index references.
95 Bingley’s Journal, 20–27 June 1772.
96 General Evening Post, 2–5 January 1773
97 ‘Ship News Extraordinary’, Morning Chronicle, 29 June 1772.

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