A nice juxtaposition. First up, FT Alphaville:
From the University of Reading:
Research by a team of academics at the University of Reading’s ICMA Centre has established clear parallels between the events of King Edward I’s time in the late 13th century and today’s credit crunch.
Not too much dissimilar in leading to the work of historian Philip Kay, of Oxford, who in November ruminated on the Roman credit crunch:
The essential similarity between what happened 21 centuries ago and what is happening in today’s UK economy is that a massive increase in monetary liquidity culminated with problems in another country causing a credit crisis at home. In both cases distance and over-optimism obscured the risk .
(And for the record, the Tired Fools blog has an even earlier Roman crunch)In the words of Max Beerbohm, history does not repeat itself. The historians repeat one another. Back to Longshanks...
...This though, undoubtedly the best part:Dr Bell continued: “It should be noted that the medieval economy was much less dependent on credit and banking than our modern economy. However, had Edward I faced today’s crisis, initially, he would probably have placed senior executives under house arrest, most likely without trial...MORE
Taking a different tack is Paul Kedrosky:
Is Financial History Bunk?
Henry Ford said it first and best, “History is more or less bunk”. Is financial history any different? I ask myself that question a lot lately, almost every time I read something where the analysis compares the current “recession” to the average of something in a prior recessionary period.
For starters, there are precious few prior periods, with less than a dozen downturns worth the name in the last century. So we’re already working from a tiny sample size.
Second, there are oodles of reasons to expect that such situations are closer to unique than analogous. Is the previous example a recession? A depression? Was it in the U.S.? Where were rates going into it? Was it consumer led? What was inflation at the outset? Where was unemployment? What triggered the downturn? What was consumer debt load? I could go on and on, but you get the point I’m sure: History is awfully flawed as a guide for what is going to happen next when you’re dealing with small sample sizes and when inter-period situational variance is so high.
So, why do it? Why talk about which sectors lead in/out? Why mention that this is the best two-day week in modern market history? Why talk about the length of typical recession since WWII? Why go to any of those lengths? In part because it makes people feel better, which is nice; in part because it gives market analysis the patina of a science, which is wrong but also nice. And, yes, there is also that sometimes there is even some validity to it -- that, all else being equal (which it rarely is), we might things to unspool in a similar way this time as they did the last time something like this happened....MORE