The Atlantic

Those Who Don’t Learn From Financial Crises Are Doomed to Repeat Them

The first modern market crash, in 1987, reflected lasting changes in how Wall Street works. Regulators still haven’t adjusted.
Source: Andrew Burton / Getty

Veterans of the stock market insist that the four most dangerous words on Wall Street are “this time is different.”

It rarely is. In the autumn of 1929, Irving Fisher, a prominent economist at Yale, assured Americans that stock prices had reached “what looks like a permanently high plateau.” That was on October 15, just days before the opening stumble in an epic crash that, by its nadir in 1931, would cut the American stock market’s value by almost 90 percent. In early 2000, exuberant tech analysts argued that revenues and profits were no longer the metrics that mattered in the internet age. Then the dot-com bubble burst and the technology-laden Nasdaq Composite Index fell almost 80 percent between March 2000 and October 2002. Clearly, when the market is soaring, it can be ruinous to believe that its highs are the mark of some fundamental financial shift.

But sometimes, the market really is different. One of those times was October 19, 1987—Black Monday, the day of the largest percentage declines in

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