The Financial Times Click here. Hot Stocks, High Living and The Mother of All Crashes. Essay: Liaquat Ashamed makes a convincing argument that the boom before the 1873 global crisis has unsettling parallels with today's AI Frenzy. parallels with today’s AI frenzy. By Patrick Foulis ### **Main Article:** For most people working in markets, business or government, the canonical examples of a global financial crisis are 1929 and 2007-09. Liaquat Ahamed’s new book brings to life a third global cataclysm that was not like either of its successors and raises intriguing parallels with today’s technology and geopolitically charged world. The cast of 1873 includes Mark Twain, Karl Marx, Egyptian accountants and Prussian officers turned speculators. The boom and the bust they lived through helped create the modern world. The crash was brutal. In one day in May, shares in Vienna collapsed by 45 per cent. In September, America’s leading investment bank, Jay Cooke & Company, collapsed, leading the New York Stock Exchange to suspend trading. There was a bond market panic and the contagion fuelled a global credit crunch. By 1876, cross-border lending via London had dropped 80 per cent. “Around the world, people were driven by a widespread sense of resentment at the injustice of things, and politics took a darker turn,” writes Ahamed. The deeper drama is the euphoric build-up and the toxic aftermath. In the 1850s and 1860s, a long boom had three causes. First, the absence of a global war, although there were many smaller ones. Second, an investment surge in infrastructure: railways mainly, but also canals and subsea cables. The third was a modernised financial system. Governments issued debt more systematically, often masterminded by the Rothschild banking dynasty. Because the financial system was anchored to bullion, new discoveries of gold expanded its funding capacity. And a burgeoning middle class in the US and Europe began to invest in stocks and bonds. All of this resulted in an explosion of financial activity: over 25 years, the total market value of financial assets in London, Paris and New York tripled to $60bn. Much of this found its way to the real economy. During this period, annual capital investment in western economies rose from 10 per cent of GDP to above 15 per cent, an unprecedented level at that point. Transformative projects were financed with securities. America’s coasts were connected when the Central Pacific and Union Pacific railroads were linked in 1869. The Suez Canal was opened six months later. In 1870, Bombay — as it then was — was linked to Calcutta by rail.