While reading some historical information I wrote a couple of years ago, I was struck by some similarities. (Abbreviated version.)

There was another outbreak of hostilities between England and France in 1792. Hoarding of money was common, credit was terminated, and banks shut down. The government was forced to make loans to merchants so that commerce could continue. Devaluation of the pound occurred and in 1797, the Bank of England was no longer able to meet payment of accounts in gold. An economic boom came along with peace from 1801-1803, but war with Napoleon broke out again. In 1811 and 1816, Luddites destroyed factory equipment, blaming mechanization for unemployment and the ensuing loss of food and shelter. After Napoleon was exiled to Elba in 1814, demobilization threw hundreds of thousands of men on to the labour market. Poor harvests in 1816 and 1817 exacerbated the situation. There was a protest march to London from the north in 1817, and another protest gathering (in Lancashire) in 1819, when bread prices rose and trade diminished. Economic conditions did not stabilize until 1821. In the early 1820s, factories were constructed at astounding rates and overseas investment experienced great popularity. The bubble burst in 1825, interest rates rose and unemployment was rife. There was a depression in 1826, a recovery in 1827, prosperity in 1828 and depression in 1829 and 1830.

-- Old Git (anon@spamproblems.com), May 07, 1999

Answers

Yes, its always the same. Speculative mania in something, followed by an external (usually unrelated) event which causes people to rethink what they are doing followed by panic and crash. In 1792 the speculative mania was in canals. the exernal event was the reign of Terror in France and the panic and crash was in february of 1793. Charles P. Kindlegerger gives a superb and fascinating treatment to this economic cycle over 400 years in "Manias, Panics and Crashes". It will change the way you view the world.

So, we have a record mania in stock, and Y2k as the guaranteed external event. When does the investing public rethink what it is doing?

Interestingly, while these things occur again and again, they tend to move from stocks to hard currencies to new technology to real estate, but never twice in the same sector during the life of an investor.

-- noel (ngoyette@csc.com), May 07, 1999.