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L.9 · BEGINNER · 2 MIN

Financial Crises: How Economies Break Down

Financial crises follow recognizable patterns that repeat across centuries and countries. Understanding them is one of the most valuable skills an investor can develop.

Quiz · 5 questions ↓
§ 01
CrisisYearTriggerMarket Drop
Dot-com bust2000Tech bubble valuationsS&P -49%
Global Financial Crisis2008Subprime mortgagesS&P -57%
COVID crash2020Pandemic lockdownsS&P -34%
2022 bear market2022Inflation + rate hikesS&P -25%
§ 02

Crises are when the most wealth is both destroyed and created. The investors who survive and deploy capital at the bottom earn generational returns. The key is having cash and courage when everyone else has neither.

§ 03
You see: bank stocks down 30% in a month, credit spreads widening dramatically, commercial paper market freezing up. What's the most disciplined response?
Five questions · AI feedback

Sit with the ideas.

Corporate bond spreads have widened from 1.2% to 3.5% over three months, but the S&P 500 is only down 5% from its high. A colleague says ‘stocks are fine, the credit market is overreacting.’ How do you evaluate this?

Why:

Other lessons in this course.

  1. 01Inflation: What It Is and Why It Matters
  2. 02The Fed and Interest Rates: How Policy Moves Markets
  3. 03The Yield Curve, in Plain English
  4. 04GDP: What the Economy Actually Produces
  5. 05The Business Cycle: Timing the Economic Seasons
  6. 06Fiscal Policy: Government Spending, Taxes, and Deficits
  7. 07The Fed’s Advanced Toolkit: QE, QT, and Forward Guidance
  8. 08Trade, Exchange Rates, and the Dollar
  9. 09Financial Crises: How Economies Break Down— reading now
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