The History of Financial Crises, 1637-Present

The goal of this course is to discuss the 387-year history of financial crises through the great meltdown of 2008 and its aftermath, culminating in the COVID-19 pandemic crisis. We examine recurring historical patterns of financial bubbles, from tulips to bitcoins, without overlooking critical differences and historical contexts. If history repeats itself, why can't we avoid making the same mistakes repeatedly? The 2008 financial crisis happened at a time when mainstream macroeconomists (including the former Federal Reserve Chairmen Alan Greenspan and Ben Bernanke) could not even imagine that such a meltdown was within the realm of possibilities. Instead, they were emphasizing the great moderation, that is, the idea that business cycles had vanished for all practical purposes. These economists were wrong because they disregarded warning signs and used inadequate economic models to gauge the situation. Similarly, the COVID-19 recession occurred just at the time when pundits were boasting of a roaring economy. We also assess our current economic situation, including the bailout of Wall Street that failed to pay adequate attention to the problems faced by the everyman on Main Street and the ways in which it contributed to the rise of populism. We conclude with the analysis of the financial challenges in the wake of the COVID-19 pandemic.