(Financial Times, Robin Wigglesworth and Gillian Tett, April 22, 2026)
Financial crises are not a new phenomenon: even the Babylonians periodically resorted to debt forgiveness to avoid social explosions, literally breaking the clay tablets on which credits were recorded. Today, with global public debt projected to reach 100% of GDP by 2029 (and 235% including private debt), geopolitical tensions, the energy shock, and risks in the private credit sector, many parallels with the past become unsettling again. Studying history offers valuable lessons to understand current risks and possible responses.
A first lesson is that financial systems collapse especially when assets considered “safe” prove fragile. From the “Trinity Default” of 1557 to the subprime mortgage crisis of 2008, the real danger comes when investors discover that what they believed to be solid is not. Today, U.S. Treasuries represent the global “risk-free” asset: if their reliability were seriously questioned, the damage could be immense.
A second lesson concerns the role of financial leverage, which changes form but remains destructive. In the 19th century, it was railroad bonds that triggered the panic of 1873; today it is the repo market (over $13 trillion just in the U.S.) that represents an opaque pillar of the system. When short-term financing freezes, as in 2008 with Bear Stearns and Lehman, the consequences are devastating.
Lessons from history on financial crises
“The financial crises of history teach us that systems collapse especially when assets considered ‘safe’ prove fragile.”
The danger of financial leverage
“No investor likes to lose money in stocks or junk bonds. But no one should be surprised that it can happen. […] Leverage – whether in the form of traditional bank debt, margin loans, or complex derivatives – is what turns a fire into a hell.”
The case of American railroads
“The construction of railroads represented the greatest investment boom in history. […] In 1873 Jay Cooke & Co, the leading American investment bank, collapsed under the weight of unsold railroad bonds. This caused a gigantic financial crisis and inaugurated what became known as the Great Depression.”
The American “wildcat” banks and stablecoins
“In antebellum America many banks issued paper money without strict rules, becoming known as ‘wildcat banks.’ […] Many experts fear that the stablecoin phenomenon could lead to a repeat of the wildcat bank crisis.”
The Savings and Loans crisis and its consequences
“The Savings and Loans crisis of the 1980s led to one of the largest waves of bank failures in history and helped lay the groundwork for the global financial crisis of 2008.”
(Excerpt from the newsletter by Giuseppe Liturri)
