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Have any two financial crises happened for the same reasons ? I’m in my early 30s and can recall the following in the US. All for different reasons which would

Have any two financial crises happened for the same reasons ? I’m in my early 30s and can recall the following in the US. All for different reasons which would lead me to believe that government regulation post crisis can be effective at avoiding the same crisis from repeating (while arguably could cause a new one): - mortgage crisis 07 - dot com 00 - savings and loans late 80s - oil crisis late 70s

Torwald 7y ago
> Have any two financial crises happened for the same reasons ? Yes, all of them for the same reason: FIAT currency instead of real money.
- empath75 7y ago
  What caused the many many financial panics of the 19th century and the Great Depression?
- xadhominemx 7y ago
  Yes, that’s were no banking panics before the end of Bretton Woods in 1971
- naravara 7y ago
  What’s “real” money? We going back to trading livestock? You realize even hard specie only has value because of government fiat declaring that it’s appropriate to use for public debts right?
  - Torwald 7y ago
    > What’s “real” money? Money based on value of some kind, as opposed to debt.
    - naravara 7y ago
      Who decides what "value" is or what things should be values at? The whole point of money is to make unspecified commitments for future production. If you want direct exchange of value then you're bartering. The only reason we ever decided on gold or silver as the store of value was because kings made it so.
      - Torwald 7y ago
        > Who decides what "value" is or what things should be values at? The buyer. By paying the price.
        naravara 7y ago
        So we're back to barter again, because you're going to need to negotiate value independently for each and every traded good if you don't have an agreed upon unit of accounting (i.e. defined currency).
  - 0x445442 7y ago
    Real money would be any instrument that's based on work already performed instead of work promised to be performed in the future, i.e. not debt based.
    - pjc50 7y ago
      But that's not actually what you want for preserving value: you want to know that a unit now buys you a loaf of bread today or next week or in ten or a hundred years time. Currency is useful because you can use it to buy future work.
- Gpetrium 7y ago
  Fiat currency is one of the reasons society has had a lot more stability in the value of money in comparison to any other time in the past. Currencies tied to commodities such as gold, silver, etc have always been more volatile due to supply oscillation, business cycles and periodic bursts of 'pocket' recessions.
  - simula67 7y ago
    The problem with fiat currencies is that there is just a little too much temptation to print a truckload when there are "emergencies". This often causes hyperinflation or massive inequality leading to the rise of populism and democratic backsliding.
    - Gpetrium 7y ago
      Printing a truckload of currency is often a byproduct of populism. Even without fiat currencies, governments would simply use other methods to debase the value of their coins [1] [1] https://en.wikipedia.org/wiki/Methods_of_coin_debasement https://en.wikipedia.org/wiki/Methods_of_coin_debasement
  - Torwald 7y ago
    The constant inflation due to fiat currency is worse than the effects you describe, because it has destroyed more wealth.
Gpetrium 7y ago
The answer is yes and I always point to the Financial Crisis of 33 AD in Rome which was mainly caused by a mass issuance of unsecured loans by the Roman banking house.[1] Some of the major reasons why financial recessions happen are: abnormal leveraging, liquidity mismatches, wars, taxes, subsidies, governance. [1] https://www.businessinsider.com/qe-in-the-financial-crisis-of-33-ad-2013-10?r=US&IR=T&IR=T https://www.businessinsider.com/qe-in-the-financial-crisis-o...
SkyMarshal 7y ago
>Have any two financial crises happened for the same reasons? This book by two economists seeks to answer that question: This Time It’s Different: Eight Centuries of Financial Folly http://www.reinhartandrogoff.com/ http://www.reinhartandrogoff.com/ Hint: yes.
- pjc50 7y ago
  Those authors are famous for an incredibly damaging error: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf http://www.peri.umass.edu/fileadmin/pdf/working_papers/worki... / https://www.theatlantic.com/business/archive/2013/04/forget-excel-this-was-reinhart-and-rogoffs-biggest-mistake/275088/ https://www.theatlantic.com/business/archive/2013/04/forget-...
DebtDeflation 7y ago
>Have any two financial crises happened for the same reasons? Yes, they all do. Fundamentally, they are the result of leverage (usually with a significant amount of maturity and liquidity mismatch) being used to bid up the price of capital assets. HIGHLY recommend reading Irving Fisher's "Booms and Depressions" and "The Debt Deflation Theory of Great Depressions" as well as pretty much everything Hyman Minsky wrote as a starting point. This is a subject that has fascinated me for decades.
- isoskeles 7y ago
  I believe the question implied "reason" being something more specific like mortgage-backed securities or a tech bubble, not something generic. Also, the submission was previously titled something like, "Banks are cozying up to the same types of mortgage bonds as the ones from 2008."
  - DebtDeflation 7y ago
    Yes, the specific capital asset - be it tulips, tech stocks, real estate, or something else - will definitely vary.
mattferderer 7y ago
Ray Dalio of Bridgewater and author of the famous Principles book recently wrote a nice article detailing the history of the US - https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/ https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/ You can also find it on a podcast or two where someone reads it.
charwalker 7y ago
There is a consistent trend of crash, liberal leadership elected, passing liberal economic recovery and regulation legislation, time for Americans to forget why the crash happened, then the election of conservative leadership, cannibalization of successful regulation, tax cuts, then another crash. This happened under W into 2007 and under Trump today (with the addition of tariffs). It also happened under Reagan in the 80's (trickle down...). generally speaking, regulation slows but also stabilizes economic growth. Until the removal of the gold standard and stronger fiscal and economic policy in the 30's, we had a boom bust cycle almost yearly with inflation/deflation cycles often within 16 months and massive spikes and drops in the stock market. Since the New Deal era, the stock market has seen typically steady growth without constant swings in inflation and a longer trend or cycle to economic crashes usually dictated by the process in my first paragraph. Inflation rates since 1914 (see the negative or deflation period in the early 20's): https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.usinflationcalculator.com/inflation/historical-i... Dow Jones average over the last 100 years (see the ups/downs leading into WWII and the not uniform but consistent growth since the New Deal era): https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart https://www.macrotrends.net/1319/dow-jones-100-year-historic... History of US recessions (very brief but note that regulation/government entities created to prevent the same issue from coming up again like the 1907 recession): https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart https://www.macrotrends.net/1319/dow-jones-100-year-historic...

Torwald 7y ago

> Have any two financial crises happened for the same reasons ? Yes, all of them for the same reason: FIAT currency instead of real money.

empath75 7y ago
What caused the many many financial panics of the 19th century and the Great Depression?
xadhominemx 7y ago
Yes, that’s were no banking panics before the end of Bretton Woods in 1971
naravara 7y ago
What’s “real” money? We going back to trading livestock? You realize even hard specie only has value because of government fiat declaring that it’s appropriate to use for public debts right?
- Torwald 7y ago
  > What’s “real” money? Money based on value of some kind, as opposed to debt.
  - naravara 7y ago
    Who decides what "value" is or what things should be values at? The whole point of money is to make unspecified commitments for future production. If you want direct exchange of value then you're bartering. The only reason we ever decided on gold or silver as the store of value was because kings made it so.
    - Torwald 7y ago
      > Who decides what "value" is or what things should be values at? The buyer. By paying the price.
      - naravara 7y ago
        So we're back to barter again, because you're going to need to negotiate value independently for each and every traded good if you don't have an agreed upon unit of accounting (i.e. defined currency).
- 0x445442 7y ago
  Real money would be any instrument that's based on work already performed instead of work promised to be performed in the future, i.e. not debt based.
  - pjc50 7y ago
    But that's not actually what you want for preserving value: you want to know that a unit now buys you a loaf of bread today or next week or in ten or a hundred years time. Currency is useful because you can use it to buy future work.
Gpetrium 7y ago
Fiat currency is one of the reasons society has had a lot more stability in the value of money in comparison to any other time in the past. Currencies tied to commodities such as gold, silver, etc have always been more volatile due to supply oscillation, business cycles and periodic bursts of 'pocket' recessions.
- simula67 7y ago
  The problem with fiat currencies is that there is just a little too much temptation to print a truckload when there are "emergencies". This often causes hyperinflation or massive inequality leading to the rise of populism and democratic backsliding.
  - Gpetrium 7y ago
    Printing a truckload of currency is often a byproduct of populism. Even without fiat currencies, governments would simply use other methods to debase the value of their coins [1] [1] https://en.wikipedia.org/wiki/Methods_of_coin_debasement https://en.wikipedia.org/wiki/Methods_of_coin_debasement
- Torwald 7y ago
  The constant inflation due to fiat currency is worse than the effects you describe, because it has destroyed more wealth.

Gpetrium 7y ago

The answer is yes and I always point to the Financial Crisis of 33 AD in Rome which was mainly caused by a mass issuance of unsecured loans by the Roman banking house.[1] Some of the major reasons why financial recessions happen are: abnormal leveraging, liquidity mismatches, wars, taxes, subsidies, governance. [1] https://www.businessinsider.com/qe-in-the-financial-crisis-of-33-ad-2013-10?r=US&IR=T&IR=T https://www.businessinsider.com/qe-in-the-financial-crisis-o...

SkyMarshal 7y ago

>Have any two financial crises happened for the same reasons? This book by two economists seeks to answer that question: This Time It’s Different: Eight Centuries of Financial Folly http://www.reinhartandrogoff.com/ http://www.reinhartandrogoff.com/ Hint: yes.

pjc50 7y ago
Those authors are famous for an incredibly damaging error: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf http://www.peri.umass.edu/fileadmin/pdf/working_papers/worki... / https://www.theatlantic.com/business/archive/2013/04/forget-excel-this-was-reinhart-and-rogoffs-biggest-mistake/275088/ https://www.theatlantic.com/business/archive/2013/04/forget-...

DebtDeflation 7y ago

>Have any two financial crises happened for the same reasons? Yes, they all do. Fundamentally, they are the result of leverage (usually with a significant amount of maturity and liquidity mismatch) being used to bid up the price of capital assets. HIGHLY recommend reading Irving Fisher's "Booms and Depressions" and "The Debt Deflation Theory of Great Depressions" as well as pretty much everything Hyman Minsky wrote as a starting point. This is a subject that has fascinated me for decades.

isoskeles 7y ago
I believe the question implied "reason" being something more specific like mortgage-backed securities or a tech bubble, not something generic. Also, the submission was previously titled something like, "Banks are cozying up to the same types of mortgage bonds as the ones from 2008."
- DebtDeflation 7y ago
  Yes, the specific capital asset - be it tulips, tech stocks, real estate, or something else - will definitely vary.

mattferderer 7y ago

Ray Dalio of Bridgewater and author of the famous Principles book recently wrote a nice article detailing the history of the US - https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/ https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/ You can also find it on a podcast or two where someone reads it.

charwalker 7y ago

There is a consistent trend of crash, liberal leadership elected, passing liberal economic recovery and regulation legislation, time for Americans to forget why the crash happened, then the election of conservative leadership, cannibalization of successful regulation, tax cuts, then another crash. This happened under W into 2007 and under Trump today (with the addition of tariffs). It also happened under Reagan in the 80's (trickle down...). generally speaking, regulation slows but also stabilizes economic growth. Until the removal of the gold standard and stronger fiscal and economic policy in the 30's, we had a boom bust cycle almost yearly with inflation/deflation cycles often within 16 months and massive spikes and drops in the stock market. Since the New Deal era, the stock market has seen typically steady growth without constant swings in inflation and a longer trend or cycle to economic crashes usually dictated by the process in my first paragraph. Inflation rates since 1914 (see the negative or deflation period in the early 20's): https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.usinflationcalculator.com/inflation/historical-i... Dow Jones average over the last 100 years (see the ups/downs leading into WWII and the not uniform but consistent growth since the New Deal era): https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart https://www.macrotrends.net/1319/dow-jones-100-year-historic... History of US recessions (very brief but note that regulation/government entities created to prevent the same issue from coming up again like the 1907 recession): https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart https://www.macrotrends.net/1319/dow-jones-100-year-historic...