Timothy Knight - Panic, Prosperity, and Progress: Five Centuries of History and the Markets

P ANIC , P ROSPERITY , AND
P ROGRESS

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P ANIC ,
P ROSPERITY , AND
P ROGRESS

Five Centuries of History and
the Markets

Timothy Knight

Cover Design: Wiley
Cover Illustration: top: gettyimages.com/Robin Bartholick; background: gettyimages.com/Keystone-France; bottom: gettyimages.com/DEA/A. Dagli Orti

Copyright 2014 by Timothy Knight. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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ISBN 9781118684320 (Hardcover)
ISBN 9781118746172 (ePDF)
ISBN 9781118746110 (ePub)

This book is dedicated to Lee Barba, a fellow historian
and student of the markets. Thank you for taking the risk
that others lacked the courage to take.

PREFACE

A s I suspect the case is with many others, my interest in history did not reveal itself until long after my formal education was complete. A schools offering of dates, places, and long-forgotten names captures the interest of very few children, and unfortunately it usually snuffs out any latent desire they might have to explore tales of the past that can offer up wisdom, insight, and previously unseen linkages.

For most of my adult life, I have had a deep and abiding interest in two related subject areas: history and financial markets. While the two might seem to be only obliquely related, they are actually engaged in a constant dance, with one informing the actions of the other. Historical events move currencies, stocks, debt, and all other flavors of fiscal instrument, and likewise movementsparticularly exaggerated movementsin the financial markets can drive the decisions that shape history in real time.

When I first developed the outline of this book, I tried to gather up what I suspected were the most interesting and market-moving developments of the modern age. To my surprise, some of the events that I thought would have a major impact (such as the Kennedy assassination in 1963 or the London subway bombing of 2005) were, as far as financial markets were concerned, virtually immaterial; it was if they had never even happened. However, other topics I had initially left out, such as the Russian debt crisis of 1998, turned out to be monumentally important.

The completed book you are holding contains two dozen chapters of what I consider the most interesting and important episodes over five centuries that have had an impact on the thinking and behavior of financial markets. There are manias, panics, battles with inflation, the travails of war, and stories of riches both won and lost. The tales extend from early seventeenth-century Holland up to the twenty-first-century United States.

My hope is that, having read these accounts, the reader can gain perspectivespecifically, perspective of how consistent human behavior has been over the centuries, and how in spite of extraordinary technological, political, and legal changes, the templates that govern humanitys relationship with both opportunity and fear are surprisingly steady.

There will undoubtedly be new chapters in your own lifetime of globally important events that move both markets and sentiment. In the end, I hope the reader can be better armed to comprehend the worlds complexities and changes by way of the knowledge and insights this book endeavors to provide.

Tim Knight
Palo Alto, California
August 1, 2013