Monday, March 18, 2013

How complex the world is.

Source: Wikipedia
A couple of years ago I read 1848: Year of Revolution by Mike Rapport. It described the wave of political unrest that swept across much of Europe in that year. The table above shows the terrible agricultural disaster that swept across Europe in 1845 and 1846. In their book, Manias, Panics and Crashes: A History of Financial Crises, Charles P. Kindleberger and Robert Z. Aliber describe the crash leading to the failure of a large number of banks in England in the latter half of 1847, which spread to mainland Europe in 1847, especially to France in early 1846. They describe that crash as resulting from speculation in railroads and wheat, leading to a crash when the railroads and wheat brokers could not pay off the loans they had taken out. One can see how the bad harvests led to increases in the price of wheat and then speculation in wheat; perhaps the agricultural crisis also led to a fall in the use of railroads. Looks like a crisis in agriculture led to a crisis in finance as well as a hunger crisis which together led to a political crisis.

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