A HISTORY of

WORLD
FINANCIAL
CRISIS
 Boston, USA, 14 July 2009. It is
often said that those who do not
remember the past are doomed to
repeat it. With economics it's no
different, considering the world
has experienced dozens of
crashes and recessions,
undoubtedly caused by
acquisitive traders and lawmakers
with few memories of the past. So
let us review past crashes -
hopefully we won't repeat them.
 When Harvard's James Stock
introduced the term "The Great
Moderation" in 2004, he led many
to believe that history indeed was
irrelevant. The theory was that
technology, a wiser central bank
policy, and more open markets for
goods and labor dampened the
effect of any economic cycles.
 Whether or not "The Great Moderation"
directly gave rise to irresponsible
legislators, overzealous investors, and
creative accountants is irrelevant.
Arguably, these are human traits that
always have existed and always will. But as
they converged and grew, signs emerged.
Long Term Capital Management collapsed
in 1998. The dot-com bubble popped in
early 2000, and the next year Enron died.
Warren Buffet saw it: In 2002 he made a
prediction about derivatives, "... these
instruments will almost certainly multiply
in variety and number until some event
makes their toxicity clear... These are
financial weapons of mass destruction."
 Once Bear Stearns failed almost
two years ago - in August of 2007
- and the subprime and credit
problems exploded, it was
obvious there was no such thing
as a "Great Moderation".
Let's take a look at history and
some of the crashes, panics,
failures and falls of the past 350
years or so.
 1637 - Tulip mania damages the futures market
and Dutch trade in general.
1720 - French and British stocks of firms
cashing in on New World resources hit bottom.
1797 - Reserves in the UK fall low creating a
monetary crisis. BOE puts a hold cash payments
creating widespread public panic.
1810 - English credit crunch.
1819 - Only 43 years old, the US experiences its
first major financial crisis.
1825 - London stock market panic from over-
speculation in Latin American investments.
1836 - US real estate speculation causes stock
markets to crash in the UK, Europe, then the
US.
 1847 - A credit crisis and bank panic ensue when
railroad stock prices crash in France and the UK.
1857 - During the Civil War a US credit crisis crashes
equity prices. All nations that trade with the US are
affected.
1866 - "Black Friday" happens from railroad
speculation. A bank panic starts which leads to lack
of credit.
1873 - Vienna stock exchange collapses, causing the
"great stagnation" on a global scale and lasts until
1896.
1882 - In France, Union Generale goes bankrupt
causing banking crisis and market crash.
1890 - The UK's oldest bank, Barings, nearly
collapses from its exposure to Argentine debt.
1907 - US bank panic spreads to France and Italy
after stock market collapse.
 1921 - Commodity prices crash.
1923 - Hyperinflation in Germany starts
monetary crisis.
1929 - "The Great Depression" begins after
equity crash.
1931 - Financial crises experienced by the
UK, Japan, Germany, and Austria.
1933 - Gold standard given up by the US,
starting panic in the banking system.
1966 - US credit crisis creates deflation
and huge economic slump.
1973 - World financial crisis begins after
OPEC quadruples the price of oil.
 1982 - Global credit crunch prevents
many developing countries from paying
their debt
1987 - Bond and equity market crashes.
1989 - Japanese bubble.
1989 - Junk bond crisis.
1992 - French Maastricht Treaty sparks
crisis in European Monetary System
1994 - Major bond market correction.
1995 - Mexican financial crisis caused by
the peso's peg to the dollar during
excessive inflation.
 1997 - Asian financial crisis creates exchange rate
and banking crisis, created from stock market and
real estate speculation, along with many Asian
currencies pegged to the US dollar.
1998 - Russia defaults on payment obligations
during major financial crisis.
2000 - Dot-com bubble pops, creating a massive
fall in equity markets from over-speculation in
tech stocks.
2001 - Another junk bond crisis.
2001 - September 11 attacks create risk by
hindering various critical communication hubs
necessary for payment on the financial markets.
2001 - Economic crisis in Argentina, resulting in
the government defaulting on payment
obligations.
 2002 - Bond market crisis in Brazil.
2007 - US real estate crisis causes the
collapse of massive international banks
and financial institutions. Equity
markets take a dive.
2008 - Today's financial crisis
punctuated by credit crunch and a
frozen interbank market.
 History tells us that opportunities will
emerge as we recover from the current
crisis, as valuations are low. But
opportunistic trading is not the key to
long-term value. However, we will
inevitably return stronger and wiser
than before - just don't forget the past.
REFERENCE:
http://www.economywatch.com/econom
y-business-and-finance-
news/A_history_of_world_financial_crise
s_07-14.html