Historian: we are heading for a 1914-style collapseBreaking News
While he does not suggest we are heading for another world war, he sees remarkable political and financial parallels between today and the period before the outbreak of hostilities in 1914. Then, as now, geopolitical risks were mounting against a benign economic backdrop of low and stable inflation.
The risks sound familiar: an overstretched empire; rivalry between two great powers, manifested in simmering tensions over trade; a rogue regime sponsoring terrorism. “The risks back then were like the risks today,” said Ferguson.
However, investors in 1914 largely ignored the rising political risks, and stock-market volatility remained low — as it is today. In fact, the financial press of the time did not even entertain the possibility of war until July 22, 1914, three weeks after the assassination of Archduke Franz Ferdinand and just days before war was declared.
When, in early August, investors finally appreciated the risks, the stampede for the exit was so great stock markets round the world were forced to close. The London market did not open again until the end of the year.
Ferguson believes that if the markets had remained open, the collapse would have been more serious than the Wall Street crash of 1929. He said: “That is one of the most important, but least understood, facts of financial history. Everybody assumes that 1929 was the big one, but 1914 was far, far worse.”
Although he does not suggest we are heading for another crash of that magnitude, he believes investors today are as complacent as their great-grandfathers.
comments powered by Disqus
Guy Storms - 8/21/2005
I would suggest our complacency is far greater than that of investors of 1914. With our historical knowledge of such events, we have more tools available to counteract the prevailing "market forces".
In fact, with measures such as deposit insurance and Bretton Woods as examples, the Western World's economic community implemented initiatives to avoid the dramatic impacts of recessions/depressions in the future.
Yet two generations later, we see the safety nets now dismantled; banks can sell insurance, unscupulous sharks speculate on currency, "hedge funds" are the rage of the mega-rich and pension funds have been surrendered to the stock market.
Once again, everyone is codependent in the "market" and once again when the roller coaster begins its race to the bottom, the small investors and consumers will suffer. The Morgans, Rockefellers and Rothchilds will be just fine. For them, it will simply be a dramatic "market adjustment", making room for future opportunities.
We are, however, quickly approaching that time when our mining of non-renewable resources reaches the point of depletion and renewable resources are harvested beyond their ability to regenerate themselves. Demand is growing beyond nature's capacity to satisfy it.
Will this century be recorded as the incubating stage of the Great Resource Wars?
- Rubio Surges Into Second In New Hampshire
- Branstad Says Cruz Ran ‘Unethical’ Campaign
- Christie Highlights Santorum’s Endorsement of Rubio
- Portman Comes Out Against Trade Deal
- Megyn Kelly Gets a Book Deal
- A Big List of the Bad Things Clinton Has Done
- An Unambiguous Sign Sanders Won Last Night’s Debate
- Still Friends at the End
- Quote of the Day
- Trump Still Leads as Clinton Slips
- Clinton Can’t Shake Image as Wall Street’s Friend
- Maddow Doesn’t See Sanders Winning
- Why Does the Media Still Shield Chelsea Clinton?
- Bush Jokes His Mother May Have Abused Him
- Rubio Closes the Gap in New Hampshire
- Newly released interactive map shows images of destroyed monuments of Mosul
- How the Rise of the Post Office Explains American Innovation
- These Americans are reliving history and don’t mind repeating it
- Britain largest home is saved for the nation
- Shelter and the slums: capturing bleak Britain 50 years ago
- WSJ features an article by a conservative calling for the abolition of Black History Month
- Mary Beard, herself a bestselling author, wonders why more women historians aren't
- Princeton U. historian Imani Perry claims mistreatment in parking ticket arrest
- Retired historian George Dennison remains on the payroll at the U. of Montana while faculty are cut
- The Atlantic profiles exciting ways to teach history