The Panic of 1907, 2nd Edition

Chapter 24Reflections and Lessons

History does not repeat itself.

But it rhymes.

—Mark Twain¹

The recurrence of financial crises prompts analysts to scour history for precedents and solutions. This is right and useful. History matters. The thoughtful reader should draw insights from events such as the Panic of 1907. Yet caution is warranted: historical events rarely map perfectly onto the present day—they only rhyme. And history is easily abused, a fact that should prompt any reader to think critically of authors’ attempts to draw large ideas from particular facts.² Nevertheless, narrating historical events without also discussing their implications is a classic error in the world of practical affairs. Therefore, with a sense of obligation tempered by humility we close this history by highlighting some lessons, questions, and avenues for future research:

• The role of a boom before a crisis. Not all booms spawn financial crises. So, what was it about 1897–1906 that should prompt one to scrutinize future booms as possible cradles for crises?
• The attributes of a vulnerable financial system pre‐crisis. By general assent, the U.S. financial system was unprepared for the challenges of the Panic of 1907. To what aspects of unpreparedness should one give special attention?
• Shocks. Economic surprises happen all the time, yet major financial crises are less frequent. What was it about the San Francisco earthquake that should focus one’s attention to those shocks worth worrying about? ...