<p>From debt relief in ancient Babylon to the 2008 global financial tsunami, the mistakes humanity has made in the financial realm are startlingly similar, yet never truly learned from. Global public debt is projected to exceed 100% of GDP by 2029; when private sector debt is included, that figure reaches an alarming 235%. The echoes of history grow increasingly clear and piercing.</p>
<p>Pierre-Olivier Gourinchas, Chief Economist at the International Monetary Fund (IMF), warned at the IMF and World Bank Spring Meetings that &#34;the world economy faces another severe test, with downside risks clearly prominent.&#34; Meanwhile, Ray Dalio, founder of hedge fund Bridgewater Associates, also issued a warning: fiscal pressures are exacerbating geopolitical conflicts and fostering a quasi-&#34;civil war&#34; state in the United States.</p>
<p>Facing this situation, the UK's Financial Times outlined the most significant financial crises in human history in its Wednesday column article, distilling six lessons that remain highly relevant today. Jamie Dimon, CEO of JPMorgan Chase, also noted in his annual letter to shareholders that the rise and fall of empires and the collapse of post-war order throughout history remain crucial references for understanding today's &#34;tectonic shifts.&#34;</p>
<h2>So-Called &#34;Safe Assets&#34; Are Often the Most Dangerous</h2>
<p>Stock market crashes or junk bond defaults rarely surprise markets, which is why pure stock market collapses seldom trigger systemic crises. The &#34;Black Monday&#34; crash of 1987 had almost no impact on the real economy; the bursting of the dot-com bubble in the early 2000s, which halved the S&amp;P 500 index, triggered only a mild recession.</p>
<p><strong>What truly shakes the financial system is when assets perceived as &#34;rock-solid&#34; suddenly reveal their fragility.</strong> In 1557, France, Spain, and the Netherlands defaulted simultaneously—a historical event known as the &#34;Triple Default,&#34; which reportedly &#34;shook the foundations of European finance and trade.&#34; Similarly, the 2007–2008 financial crisis was ignited by doubts about the safety of top-rated U.S. mortgage-backed securities, even though actual losses ultimately remained relatively limited.</p>
<p>Today, U.S. Treasury bonds serve as the global &#34;risk-free asset,&#34; underpinning not only the U.S. government's fiscal operations but also the entire dollar-based global financial system. History shows that once this perceived safety is seriously questioned, the resulting damage could be immeasurable. As Mark Twain famously said: &#34;It's not what you don't know that gets you into trouble—it's what you think you know for certain that turns out to be completely wrong.&#34;</p>
<h2>Bubbles Are Not Always Harmful</h2>
<p>Currently, artificial intelligence is the hottest topic in financial markets. JPMorgan analysts have described the trillions of dollars in investment flowing into data centers and power infrastructure as &#34;an extraordinary and sustained capital market event,&#34; projecting total AI and related infrastructure investment will reach $5 trillion by 2030.</p>
<p>However, this scale still pales in comparison to the largest investment boom in human history—the railroad construction boom. In the 19th century, U.S. railroad companies issued bonds totaling approximately $5 billion, equivalent to over $10 trillion in today's GDP terms. In 1873, Jay Cooke &amp; Co., America's premier investment bank, collapsed after failing to absorb its backlog of railroad bonds, triggering a major financial crisis that ushered in decades of depression.</p>
<p>Yet, the railroad boom ultimately connected American states tightly, propelling the nation into becoming an unmatched industrial powerhouse. Historian Richard White noted that railroads &#34;created modernity through both their failures and successes.&#34; While many investors lost everything, the infrastructure they funded became a massive dividend spanning centuries. <strong>Will AI follow this trajectory? No one knows for sure, but the similarities between the two are deeply thought-provoking.</strong></p>
<h2>Leverage Amplifies Crises</h2>
<p>Almost every major financial disaster points to the same lesson: leverage—whether through bank loans, broker margin calls, or complex nesting in derivative contracts—is the key factor that turns ordinary fires into raging infernos.</p>
<p>Today, the repurchase agreement market (repo) has become one of the most important sources of leverage in the global financial system. This market originated during World War I, created by the Federal Reserve to facilitate banks' purchases of U.S. government bonds. Since then, the repo market has grown continuously and played a critical role in past crises: the collapse of Drysdale Securities in 1982, the failure of hedge fund LTCM in 1998, and the downfall of Bear Stearns and Lehman Brothers in 2008 were all closely tied to freezes in the repo market.</p>
<p>Today, the U.S. Treasury estimates the U.S. repo market size approaches $13 trillion, while the International Capital Market Association estimates the European repo market at around €14 trillion. History repeatedly proves that once the repo market contracts, it triggers chain reactions throughout the entire financial system.</p>
<h2>Complexity Itself Is Risk</h2>
<p>In 1989, the Exxon Valdez oil tanker ran aground off Alaska's coast, spilling 11 million gallons of crude oil—an accident that unexpectedly gave birth to credit derivatives. At the time, JPMorgan faced billions of dollars in credit exposure as ExxonMobil needed funds to pay cleanup costs and fines. <strong>Its derivatives team subsequently invented the credit default swap (CDS)—a tradable loan default insurance instrument.</strong></p>
<p>The original purpose of CDS was to disperse risk, but it later evolved into extremely complex synthetic collateralized debt obligations (CDOs), causing massive losses during the 2008 financial crisis. Today, tools based on the same innovative logic—&#34;synthetic risk transfer&#34; (SRT)—are expanding rapidly. According to Bank for International Settlements (BIS) data, loans insured via SRT instruments in the U.S., Canada, and Europe now total approximately €750 billion.</p>
<p>In a recent report, the BIS warned that although regulators in multiple countries have prudently approved SRT instruments, continued monitoring is essential as the SRT market grows. Complexity often obscures risk—even financial tools designed to reduce risk are no exception.</p>
<h2>Stablecoins and &#34;Wildcat Banks&#34;: A Historical Mirror</h2>
<p>Stablecoins are currently the central issue in the crypto market. Supporters argue they make the financial system faster and fairer; critics worry they threaten financial stability and may even facilitate crime and rogue states. History offers parallels here as well.</p>
<p>During the pre-Civil War &#34;Free Banking&#34; era in 19th-century America, any commercial bank granted a state charter could issue paper currency, nominally backed by hard assets like gold. However, as Stephen Mihm, a history professor at the University of Georgia, describes: <strong>&#34;Becoming a banker was as easy as becoming a bricklayer.&#34;</strong> Numerous institutions issued currency indiscriminately, giving rise to so-called &#34;wildcat banks,&#34; rampant counterfeiting, and complete chaos in monetary order. This turmoil eventually led to the Panic of 1857, destroying much of the U.S. banking sector.</p>
<p>The Trump administration's proposed &#34;Genius Act&#34; requires stablecoins to be backed one-to-one by the U.S. dollar or other safe assets, mirroring the logic of the 1863 National Bank Act. Yet, current audit, regulation, and enforcement in the crypto space remain highly opaque—Tether, the world's largest stablecoin issuer, is primarily regulated by El Salvador—leading many experts to fear history may repeat itself.</p>
<h2>The Cure for the Last Crisis Often Sows the Seeds for the Next</h2>
<p><strong>The U.S. subprime mortgage crisis (S&amp;L crisis) is now almost forgotten, yet it was one of the largest waves of bank failures in history and laid the groundwork for the 2008 global financial crisis.</strong> Rising interest rates in the 1970s and 1980s, combined with deposit rate caps and aggressive real estate lending, ultimately triggered the collapse of numerous community banks. According to a 1993 report by the Congressional Budget Office, cleanup costs alone consumed about $200 billion from the federal government.</p>
<p>However, the deeper legacy of the S&amp;L crisis lies in how a poorly designed tax incentive spurred expansion in the mortgage securitization market, drove deregulation of the financial sector, and catalyzed the invention of credit derivatives—all three factors played central roles in the 2008 crisis.</p>
<p>After 2008, global regulators significantly strengthened oversight of banks, and the banking system's performance during the severe stress test of the pandemic confirmed the effectiveness of reforms. Yet the side effects of these reforms are equally evident: large banks have sharply reduced their willingness to make markets in assets like Treasury bonds, exacerbating market volatility during crises. Simultaneously, risky trading has shifted from regulated banks to opaque &#34;shadow banking&#34; entities like hedge funds, becoming one of the biggest concerns for current regulators.</p>
<p>History's lessons are never outdated. Those clay tablets from Babylon are not merely museum artifacts.</p>

<p>From debt relief in ancient Babylon to the 2008 financial tsunami, humanity has astonishingly repeated itself time and again in the financial realm. As global debt-to-GDP ratios approach 100%, with AI bubbles and stablecoin mania emerging simultaneously, six crisis lessons spanning millennia stand out: the most dangerous assets are often those perceived as "safest," leverage acts as wind for fire, complexity itself is risk—and the cure for the last crisis often sows the seeds for the next collapse</p>

- The article discusses historical financial crises and the persistent lessons humanity fails to learn, indicating that global public debt may exceed 100% of GDP by 2029.  
- IMF's chief economist warns of severe global economic risks, while hedge fund founder Ray Dalio ties escalating fiscal pressures to geopolitical tensions.  
- Key insights include the dangers of over-leverage, the inherent risks of complex financial instruments like credit default swaps, and the potential instability posed by emerging assets such as stablecoins, echoing past financial disruptions.

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Debt, Bubbles, and Crises: Six Iron Laws of Financial History That Still Hold True Today