I remember reading in the early 1990s for example a very interesting book about the US “long depression” of the 1880s and 1890s that began with the September 1873 crash in the NY Stock Exchange. The book explored the roots of the crisis in the railroad boom of the 1860s and wonderfully invoked the famous attempt by Jay Gould and James Fisk to corner the gold market in 1869. There was however almost no reference to events outside the US except in describing how the New York crisis subsequently affected British banks. It seemed that for the authors, events in the US pretty much explained everything that happened in the US economy before and after the 1873 crisis.
It wasn’t until a few years later when I read Charles Kindleberger’s brilliant book, A Financial History of Western Europe, that I realized that the 1873 crisis was a global crisis, and that it didn’t even originate in the US. It actually began in May, 1873, with the collapse of the Vienna stock market, which spread to Berlin and London before it hit New York. I also learned that the roots of financial instability included the 1866 collapse of Overend, Gurny, a major London bank, and that stock markets around the world had soared shortly after Barings had financed the huge French war indemnity forced upon France after the 1870 Franco-Prussian War. One of Kindleberger’s great insights was that the recycling of massive payments, such as the French indemnity, often leads to liquidity-driven speculative frenzies in stock, bond and real estate markets.
Given this history, how could anyone possibly write a serious book about the US crisis of 1873 without writing at least as much about events in Europe as about events in the US?
And yet they do.
Here’s a very important lesson: if you want to understand sone topic better (in my life it usually means learning more about the insurance industry) get outside. Learn about other only slightly related fields. It is on the comparison of different disciplines that real insight lives.
Not Unreasonable 