History of Financial Crises 1637 to Present

The goal of this course is to make sense of nearly four centuries of financial crisis, from the Dutch tulip bubble of 1637 through the global financial collapse of 2008, to the failure of Silicon Valley Bank in 2023. Along the way, we identify recurring historical patterns of speculation, euphoria, denial, and rescue, without overlooking critical differences across time, institutions, and political settings. If history keeps repeating itself, why do societies fail to avoid making the same mistakes over and over again? The financial meltdown of 2008 occurred at a time when leading macroeconomists and policymakers, including the former Federal Reserve Chairman Ben Bernanke, claimed that modern finance finally tamed the business cycle. It became clear that they blundered when the global economy imploded. How could so many smart people get it so wrong? Examining the historical evidence enables us to gain a deeper understanding of global finance and its outsized influence on economic stability, political legitimacy, and our everyday life. Rather than memorizing formulas, abstract models, or quantitative techniques the course focuses on the big picture, adopting a multidisciplinary and very-long-run perspective so that students learn how to think historically and critically about finance. Using evidence from economic history, behavioral psychology, and political economy, we examine how bubbles form, why warnings are ignored, and how financial systems repeatedly generate instability. Special attention is given to the insights of Nobel Prize-winning behavioral economists Robert Shiller and Daniel Kahneman, whose work helps explain why financial markets are so prone to collective euphoria, panic, and misjudgment. We also examine the social and political consequences of financial crisis, including the aftermath of the Wall Street bailouts that stabilized the financial system while largely neglecting main street, as eight million families were evicted from their homes. The course explores how the crisis contributed to rising inequality, political disillusionment, and the subsequent surge of populist movements. It concludes by analyzing the economic and financial impact of the COVID-19 pandemic, artificial intelligence (AI), cryptocurrency, and their implications for future financial stability.