Why have financial crises occurred with such dismaying regularity throughout history around the world? Perspective from renowned financial crisis expert Robert Aliber and leading Wall Street economist and strategist, Nicholas Sargen.
WEALTHTRACK Episode #1316; Originally Broadcast on October 07, 2016
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- Manias, Panics, and Crashes
- Global Shocks: An Investment Guide for Turbulent Markets
Do you feel as if the world is a more unstable place financially? The International Monetary Fund does. According to a front page article in the Financial Times, the IMF’s latest Fiscal Monitor reported that world debt is at record levels, $152tn worth, “more than two times the size of the global economy.” An official at the fund warned “excessive private debt is a major headwind against the global recovery and a risk to financial stability…The Fiscal Monitor shows that rapid increases in private debt often end up in financial crises.”
If you read the business classic, Manias, Panics, and Crashes, a history of financial crises, you will realize that these disruptive events have occurred with dismaying regularity throughout recorded history.
Looking back through the centuries it seems as if every decade had its booms and busts, some contained, but many contagious. Dutch tulipmania primarily affected the Netherlands in the 1600s, the separate but interconnected South Sea and Mississippi Bubbles in Britain and France spread to other European countries in the 1700s. There were numerous crises and panics on both sides of the Atlantic in the 1800s, and of course the first half of the 1900s had the globe affecting Great Depression and its related stock market crash.
However, the frequency of banking crises has increased in recent decades and they have originated in different places including Latin America, Asia and most recently the U.S. and Europe. These waves of banking crises, which also involve wide swings in currencies, stocks and real estate are why we are devoting two episodes of WEALTHTRACK to the topic.
In part one this week we’ll hear from Robert Aliber, a noted Professor of International Economics and Finance, now Emeritus, at The University of Chicago Booth School of Business. He has written extensively about currencies, international investment flows, banking issues and financial crisis over the years and is the author of several books on those topics. He is also the editor of the last three editions of Manias, Panics, and Crashes which he inherited from his late friend and fellow economist Charles Kindleberger.
One of the many economists whom Professor Aliber has mentored over the years will also join us. Nicholas Sargen, Chief Economist and Senior Investment Advisor for Fort Washington Investment Advisors has held a number of international economist and global money management roles at major financial institutions and also spent time at the Federal Reserve Bank of San Francisco and the U.S. Treasury Department. Sargen is the author of a new book, Global Shocks: An Investment Guide for Turbulent Markets.
Our guests have some fascinating historical perspective to share about why financial crises have been a fact of life for so many centuries and why their frequency is increasing.
Thank you for watching. Have a great weekend and make the week ahead a profitable and productive one.
DON’T TRY TO TIME THE MARKET
Individual Investors’ Advantage over Professional Investors
- Don’t have to worry about quarterly performance or beating a benchmark
- For professional investors timing can be everything and getting it wrong can be devastating
None this week.[/tab]
[tab]No stock mentions in this episode.[/tab]
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[tab] This is Robert Aliber’s first appearance on WEALTHTRACK. Here’s Nicholas Sargen’s appearance from the WEALTHTRACK Archives:
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Professor, author and lecturer Robert Aliber is a globally recognized expert on financial crises. Nick Sargen has spent forty years at major financial institutions identifying economic cycles and investing through them. We asked them to assess the impact of the upcoming Presidential election.