The Perils of Financial Historicism

Currently, many people are seeking parallels for today's credit crunch in the crises 1907 and 1931. But adopting the responses to those crises now would only make matters worse.

Every financial crisis is inherently unknowable – before it occurs, and as it occurs. By contrast, we understand past crises very well. Accountants go over the books, the participants tell their tales to the newspapers (or sometimes before a judge), politicians explain why they are sorting out a mess, and in the end historians put together a story.