From the Archives: Is the biggest fall to come?

Wednesday 5 June 2019

from the archive

The Global Financial Crisis of 2007-2008 was considered by many economists to be the most serious financial crisis since the Great Depression of the 1930s. The situation was shocking, and most people didn’t see it coming. But, as Professional Investor’s archives reveal, there were mounting concerns, as far back as the turn of the century, that markets would fail in the future.

It’s been more than a decade since the Global Financial Crisis (GFC), but the financial industry is still feeling the ripple effect, through increased regulation, the ongoing efforts to rebuilt trust, and in the macroeconomic environment in which it operates. 

Most people did not see the GFC coming, but, as Michael Goddard’s February 2000 article in Professional Investor reveals, economists were concerned about ‘The Big One’ as far back as the year 2000. Goddard took the historical view. He examined the crashes, bubbles, and panics of the previous 400 years, and draw links to what they might teach us.

Tulipmania and the South Seas and Mississippi Bubbles were localised affairs in their own countries, he pointed out. But the Depressions of the 1870s and the 1930s showed how global, and interconnected, the financial industry had become. 

He expressed his concern for the future, stating, “the cause of great crashes is the cumulation of excesses of speculation and production based on a manic build-up of debt.” And, he warned, many financial commentators were talking about a coming stock market crash, given the massive rise in share prices since the last secular bear market in 1973-75. The dot-com bubble obligingly began only a month later, but really, Goddard’s conclusion looked to even greater concerns. When the crash eventually comes, he asks, will it be the Greatest Crash of All?

Read the full article

Professional Investor 2000 February edition 

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