Panic of 1847
The Panic of 1847 was a minor British banking crisis associated with the end of the 1840s railway industry boom and the failure of many non-banks. Background. As a means of stabilizing the British economy, the ministry of Robert Peel passed the Bank Charter Act of 1844. This Act fixed a maximum quantity of bank notes that could be in circulation at any one time and guaranteed that definite reserve funds of gold and silver would be held in reserve to back up the money in circulation. Furthermore, the Act required that the supply of money  in circulation could be increased only when gold or silver reserves were proportionately increased. However, in 1847, the Act was suspended when the Bank of England was presented with a letter from the Prime Minister and Chancellor of the Exchequer indemnifying the Bank for a breach of the Act. The crisis in the money market ended almost immediately, without any breach of the Act. The panic of 1847 cleared away a vast number of unsound business houses, and trade generally became much more sound and healthy; this lasted until the year 1855. The following explanation by Spanish economist Jesus Huerta  de Soto of the Austrian School is based in Austrian Theory of the Business Cycle:As of 1840 credit expansion resumed in the United Kingdom and spread throughout France and the United States. Thousands of miles of railroad track were built and the stock market entered upon a period of relentless growth which mostly favored railroad stock. Thus began a speculative movement which lasted until 1846, when economic crisis hit in Great Britain.It is interesting to note that on July 19, 1844, under the auspices of Peel, England had adopted the Bank Charter Act, which represented the triumph of  Ricardo’s Currency School and prohibited the issuance of bills not completely backed by gold. Nevertheless this provision was not established in relation to deposits and loans, the volume of which increased fivefold in only two years, which explains the spread of speculation and the severity of the crisis which erupted in 1846.