[00:00] Market bubbles and their crashes always begin&nbsp; with an opportunity. Some of history's worst&nbsp;&nbsp; investments began with ideas that changed&nbsp; the world. Railways transform transport. The&nbsp;&nbsp; internet built during the com bubble transformed&nbsp; well pretty much everything. So real opportunity&nbsp;&nbsp;
[00:15] attracts money and we get rising prices. Rising&nbsp; prices attract speculation. Speculation attracts&nbsp;&nbsp; leverage. And eventually when everyone becomes&nbsp; so convinced that the prices will only rise,&nbsp;&nbsp; the whole thing starts falling apart right&nbsp; in front of their eyes. So, in this video,&nbsp;&nbsp;
[00:30] we're going to take a look at some of the biggest&nbsp; bubbles and financial crashes in history. Explain&nbsp;&nbsp; how some of the smartest people in the world got&nbsp; caught up in them and the warning signs they all&nbsp;&nbsp; shared so you can spot the next financial bubble,&nbsp; possibly even this one, before it's too late. My&nbsp;&nbsp;
[00:46] name is DC and you're watching the Coin Bureau.&nbsp; Let's start by traveling back in time to the 1600s&nbsp;&nbsp; and look at one of the earliest well-known bubbles&nbsp; in the Dutch Republic. Back then, the must-h have&nbsp;&nbsp; luxury item wasn't a sports car or a designer&nbsp; watch. It was a flower. Tulips arrived in Europe&nbsp;&nbsp;
[01:04] from the Ottoman Empire and rapidly became symbols&nbsp; of wealth and sophistication. Some rare varieties&nbsp;&nbsp; of the flower had unusual streaks and patterns&nbsp; which were considered even more valuable. So,&nbsp;&nbsp; prices started rising quickly because supplying&nbsp; was limited and demand was growing. And boom,&nbsp;&nbsp;
[01:20] the beautiful flower caught the eye of investors.&nbsp; Now, of course, they never cared about gardening.&nbsp;&nbsp; They were focused on one thing and one thing&nbsp; alone, making money. Thus, the tulip mania was&nbsp;&nbsp; born and finance discovered its favorite hobby.&nbsp; Turning something simple into something nobody&nbsp;&nbsp;
[01:35] can explain at dinner. It started with traders&nbsp; buying and selling contracts for bulbs that were&nbsp;&nbsp; still underground. And people started effectively&nbsp; speculating on flowers they had not seen and in&nbsp;&nbsp; some cases would never personally receive. To be&nbsp; fair, it's not like it destroyed the entire Dutch&nbsp;&nbsp;
[01:51] economy. People weren't trading their homes for&nbsp; one bulb. When prices reached absurd levels, the&nbsp;&nbsp; market ran out of greater fools and then buyers&nbsp; suddenly disappeared. A lot of crazy stories&nbsp;&nbsp;
[02:03] circulate about the tulip mania and most of them&nbsp; are exaggerated for a dramatic effect, but there's&nbsp;&nbsp; no mistaking that people went crazy for nothing&nbsp; more than a flower. Now, let's head west and&nbsp;&nbsp; fast forward to 1720. The South Sea Company helped&nbsp; manage government debt and held trading privileges&nbsp;&nbsp;
[02:19] which were connected to South America. This&nbsp; was a loaded operation with political backing,&nbsp;&nbsp; royal connections, and a story which involves&nbsp; access to distant markets supposedly filled with&nbsp;&nbsp; riches. But the actual trading prospects didn't&nbsp; turn out to be as impressive as the promotional&nbsp;&nbsp;
[02:35] story suggested. Nevertheless, the share price&nbsp; still increased because official support made&nbsp;&nbsp; the company look safe, and its overseas ambitions&nbsp; made it sound enormously profitable. At around the&nbsp;&nbsp; same time back in Europe, France was going through&nbsp; something similar with the Mississippi Company.&nbsp;&nbsp;
[02:51] John Law created a financial system which involved&nbsp; paper money, government debt, and shares tied to&nbsp;&nbsp; grand promises about France's territories in North&nbsp; America. Rising prices seemed to prove the scheme&nbsp;&nbsp; was working as more money entered circulation and&nbsp; share prices just kept going up. And eventually,&nbsp;&nbsp;
[03:07] confidence collapsed once the investors questioned&nbsp; whether the profits that were promised could ever&nbsp;&nbsp; justify those prices. This brought the whole&nbsp; scheme crashing. Now, despite relying on these&nbsp;&nbsp; different stories, tulips, the South Sea Company,&nbsp; and the Mississippi Company had ingredients that&nbsp;&nbsp;
[03:22] were remarkably similar. Scarcity, incredible&nbsp; promises, respected backers, and rising prices&nbsp;&nbsp; that made skepticism look foolish. And that is&nbsp; what makes bubbles dangerous. From the outside,&nbsp;&nbsp;
[03:34] they often look absurd, but from the inside,&nbsp; they feel like rare opportunities that everyone&nbsp;&nbsp; else has finally learned to recognize. A century&nbsp; after the South Sea bubble, Britain encountered&nbsp;&nbsp; an opportunity that was far more tangible. Steam&nbsp; railways. Railways were revolutionary around the&nbsp;&nbsp;
[03:51] mid 19th century. They could move people and goods&nbsp; faster than horses or canels. It could connect&nbsp;&nbsp; industrial cities and completely reshape trade.&nbsp; The network in Britain was rapidly expanded after&nbsp;&nbsp; the Liverpool and Manchester Railway proved that&nbsp; passenger travel could be commercially viable.&nbsp;&nbsp;
[04:08] So by the early 1840s, established railway&nbsp; companies were producing respectable returns&nbsp;&nbsp; and naturally investors concluded that if some&nbsp; railways were successful, then almost any railway&nbsp;&nbsp; proposal must be worth funding. So the parliament&nbsp; authorized thousands of miles of railway tracks,&nbsp;&nbsp;
[04:24] mostly on the basis of extremely optimistic&nbsp; projections. And now, as we all know, constructing&nbsp;&nbsp; a railway track isn't cheap. It requires an&nbsp; enormous enormous amount of iron, labor, land,&nbsp;&nbsp; and capital. So initially investors had to pay&nbsp; only a part of the cost of their shares. But&nbsp;&nbsp;
[04:40] little did they know railway companies could&nbsp; later demand the rest of the cost as well. And&nbsp;&nbsp; once those calls arrived, many investors realized&nbsp; that enthusiasm was much cheaper than actually&nbsp;&nbsp; building a railway track. Mounting construction&nbsp; costs and tighter credit brought this boom to an&nbsp;&nbsp;
[04:55] end by 1847. Railway shares fell heavily after&nbsp; many proposed lines were abandoned and weaker&nbsp;&nbsp; companies failed to deliver. Even routes that&nbsp; were complete sometimes struggled because several&nbsp;&nbsp; companies built competing lines to serve the same&nbsp; journeys. But there's a plot twist. Britain's&nbsp;&nbsp;
[05:11] economy transformed for the better because during&nbsp; all this chaos, they now had a railway network.&nbsp;&nbsp; Even though many of the investments failed, the&nbsp; technology ultimately succeeded. You see, there&nbsp;&nbsp; is no shortage of strange bubbles, spectacular&nbsp; crashes, and expensive lessons to explore. So,&nbsp;&nbsp;
[05:27] if you enjoy this kind of deeper look at markets&nbsp; and the forces moving the global financial system,&nbsp;&nbsp; then head over to our Finance Bureau channel and&nbsp; subscribe. That's where we unpack all manner of&nbsp;&nbsp; economic stories and dive deep into current&nbsp; macro trends so you're always informed on the&nbsp;&nbsp;
[05:41] stuff that matters most for your portfolio. You&nbsp; can find Finance Bureau using the link in the&nbsp;&nbsp; description or by scanning the QR code on screen.&nbsp; Okay, let's move on from the railway mania and&nbsp;&nbsp; drive into the 20th century. By the late 1920s,&nbsp; the United States was enjoying what appeared to&nbsp;&nbsp;
[05:58] be a new age of permanent prosperity. The stock&nbsp; market seemed to offer ordinary Americans a front&nbsp;&nbsp; row seat to the future. Corporate profits were&nbsp; rising and consumer credit was expanding. But the&nbsp;&nbsp;
[06:10] excitement turned to greed real fast and blurred&nbsp; the vision of most investors who thought that&nbsp;&nbsp; share prices would rise forever. A major source&nbsp; of fuel during this time was margin borrowing,&nbsp;&nbsp; which means that instead of paying the full price&nbsp; for shares, investors could put down a relatively&nbsp;&nbsp;
[06:25] small amount and borrow the rest from a broker.&nbsp; When prices rose, this multiplied the profits.&nbsp;&nbsp; When prices fell, it performed the same trick, but&nbsp; in reverse, which was considerably less fun. So,&nbsp;&nbsp;
[06:37] rising prices encouraged more borrowing and more&nbsp; borrowed money pushed prices even higher. And it&nbsp;&nbsp; all became a vicious cycle in which the market's&nbsp; success appeared to justify the behavior which&nbsp;&nbsp; made it increasingly fragile. But then came Black&nbsp; Thursday, the day when confidence broke. On the&nbsp;&nbsp;
[06:53] 24th October 1929, a wave of selling overwhelmed&nbsp; the market. Bankers briefly restored calm by&nbsp;&nbsp; organizing large share purchases, but this&nbsp; relief did not last long. The following week,&nbsp;&nbsp; prices collapsed again because investors&nbsp; rushed to sell in large numbers and trading&nbsp;&nbsp;
[07:09] systems struggled to keep up. and leverage made&nbsp; everything even worse. As share prices fell,&nbsp;&nbsp; brokers demanded additional money from investors&nbsp; whose collateral started to disappear. Those who&nbsp;&nbsp; could not pay were simply forced to sell. This&nbsp; was like a domino effect that pushed prices&nbsp;&nbsp;
[07:24] down further and triggered more margin calls and&nbsp; more force selling. And of course, it ultimately&nbsp;&nbsp; dragged down the entire American economy. Banks,&nbsp; farms, property markets, and heavily inepted&nbsp;&nbsp; businesses were all vulnerable, which led to what&nbsp; we call the Great Depression. The stock market&nbsp;&nbsp;
[07:39] crash damaged confidence and exposed economic&nbsp; weakness that would plague people for generations.&nbsp;&nbsp; 50 years later, this time in East Asia, Japan&nbsp; looked unstoppable. By the 1980s, Japanese&nbsp;&nbsp; manufacturers dominated industries ranging from&nbsp; cars to electronics, helping the country's economy&nbsp;&nbsp;
[07:56] grow rapidly. Investors even started to believe&nbsp; that Japanese companies might have discovered&nbsp;&nbsp; some superior way of doing business. Suddenly,&nbsp; confidence bloomed in both the stock and property&nbsp;&nbsp; markets. Cheap credit and aggressive lending made&nbsp; it easier for businesses and investors to borrow,&nbsp;&nbsp;
[08:12] while the rising land prices gave banks&nbsp; increasingly valuable collateral against,&nbsp;&nbsp; which they could make even larger loans. And so, a&nbsp; powerful loop was created because now owners could&nbsp;&nbsp; borrow more against their property as land prices&nbsp; rose. And at the height of this boom, Japanese&nbsp;&nbsp;
[08:27] property attracted almost mythical valuations.&nbsp; The NIK climbed from below 7,000 at the beginning&nbsp;&nbsp; of the decade to nearly 39,000 by the end of 1989.&nbsp; Quite the performance. Now, if you think about it,&nbsp;&nbsp;
[08:40] this boom was entirely dependent on continually&nbsp; rising asset prices and plentiful credit. And so,&nbsp;&nbsp; this financial party was disrupted because stocks&nbsp; began falling in 1980 after the Bank of Japan&nbsp;&nbsp; tightened its monetary policy. This also caused&nbsp; the property market to fall soon after inevitably.&nbsp;&nbsp;
[08:57] disappointed shareholders, bad debt for lenders,&nbsp; and the falling property market weakened the&nbsp;&nbsp; collateral which supported the bank loans.&nbsp; So instead of investing, hiring or expanding,&nbsp;&nbsp; companies that borrowed heavily during the boom&nbsp; then had to spend years paying off what they&nbsp;&nbsp;
[09:11] owed. Pure chaos. The crash in Japan happened&nbsp; relatively quickly, but repairing the balance&nbsp;&nbsp; sheets underneath it took far longer. The Nikkay&nbsp; would not exceed its bubble era record again until&nbsp;&nbsp;
[09:23] 2024, over 34 years later. And as it happens,&nbsp; just a couple of years after this fiasco came&nbsp;&nbsp; the internet. By the mid 1990s, the internet&nbsp; was moving from universities and government&nbsp;&nbsp;
[09:35] offices into ordinary homes. Suddenly, there&nbsp; was a way for people to communicate, to shop,&nbsp;&nbsp; read the news, and even build businesses online.&nbsp; This technology was going to transform society&nbsp;&nbsp; as we know it. Obviously, without waiting&nbsp; for this technology to evolve, investors&nbsp;&nbsp;
[09:51] again became slightly overexited. And just as&nbsp; expected, money started pouring into internet&nbsp;&nbsp; companies. Startups discovered that adding the.com&nbsp; to their names would attract investors even more,&nbsp;&nbsp;
[10:03] even if they had no defined path to profitability.&nbsp; Revenue was good and profits were a bonus. But&nbsp;&nbsp; despite what history taught us, rapid growth was&nbsp; again treated as the most important number. Often&nbsp;&nbsp; with limited operating histories and enormous&nbsp; projected markets, a lot of companies rushed to&nbsp;&nbsp;
[10:20] list on the stock market. Everyone ran for the&nbsp; internet spotlight. Traditional measures such&nbsp;&nbsp; as earnings were considered a thing of the past.&nbsp; Suddenly, investors started valuing businesses&nbsp;&nbsp; that were using website visits. Customer&nbsp; numbers or simply the possibility that they&nbsp;&nbsp;
[10:34] might dominate a completely new industry. It was&nbsp; all to play for. Now, this excitement also led&nbsp;&nbsp; to the funding of something real. During this&nbsp; time, telecommunications companies laid fiber&nbsp;&nbsp; optic cables and businesses developed online&nbsp; services which made consumers increasingly&nbsp;&nbsp;
[10:50] comfortable using the internet. However, this&nbsp; infrastructure did not mean every company deserved&nbsp;&nbsp; a billion dollar valuation, right? But this was&nbsp; only the time when things were starting to get&nbsp;&nbsp; interesting. AOL's agreement to acquire Time&nbsp; Warner in January 2000 captured the height of&nbsp;&nbsp;
[11:06] euphoria at that time perfectly. Who could have&nbsp; thought that an internet company was going to&nbsp;&nbsp; swallow one of the world's largest traditional&nbsp; media groups? Nobody. Of course, in hindsight,&nbsp;&nbsp; this was a clear warning that the bubble was&nbsp; about to burst. And just a couple of months later,&nbsp;&nbsp;
[11:21] in March 2000, NASDAQ peaked. Funding dried up&nbsp; once investors began demanding profits rather&nbsp;&nbsp; than promises. And many companies discovered&nbsp; that there was a difference between attracting&nbsp;&nbsp; users and building a sustainable business. Most&nbsp; of the era celebrated.com names disappeared as&nbsp;&nbsp;
[11:36] share prices collapsed and startups ran&nbsp; out of cash. Now despite all of this,&nbsp;&nbsp; the internet itself did not disappear just like&nbsp; the railways stand to this day. Both serving&nbsp;&nbsp; humanity. Companies such as Amazon managed to&nbsp; survive and new consumer habits for the internet&nbsp;&nbsp;
[11:51] developed during this boom. Businesses decided&nbsp; to build enormous industries on the networks.&nbsp;&nbsp; The investors were right about the technology,&nbsp; of course, but predicting the financial future&nbsp;&nbsp; correctly is never straightforward. There are&nbsp; way too many variables and a heap of economic&nbsp;&nbsp;
[12:06] and technological evolution that can take everyone&nbsp; by surprise. Now, another one most of you probably&nbsp;&nbsp; lived through is the housing bubble. Before&nbsp; 2008, rates were low, mortgages were easy to get,&nbsp;&nbsp; and home prices had been climbing for years.&nbsp; Naturally, buyers believed that property would&nbsp;&nbsp;
[12:22] simply keep going up forever. Lenders assumed that&nbsp; even struggling borrowers could just refinance or&nbsp;&nbsp; sell at a profit. So, banks started handing out&nbsp; loans to people who actually couldn't afford&nbsp;&nbsp; them. Some of these loans started with a low&nbsp; rate that jumped higher a couple of years in,&nbsp;&nbsp;
[12:36] and that was fine as long as prices kept&nbsp; rising. But once prices stopped climbing,&nbsp;&nbsp; the free trial ended, so to speak, and the&nbsp; subscription was extremely expensive. Banks&nbsp;&nbsp; took thousands of these mortgages, bundled them&nbsp; all together, and sold them off to investors as&nbsp;&nbsp;
[12:51] securities. Some labeled safe, some labeled risky,&nbsp; which basically meant the bank that made the loan&nbsp;&nbsp; didn't have to care anymore whether it ever got&nbsp; paid back because it wasn't their problem. And&nbsp;&nbsp; that bundle got repackaged again into something&nbsp; even more complicated and some still got stamped&nbsp;&nbsp;
[13:07] as safe. Now, on top of that, banks borrowed&nbsp; huge amounts of money to bet even bigger using&nbsp;&nbsp; very little of their own cash. And for a while,&nbsp; it worked. Payments kept coming in. Everyone&nbsp;&nbsp; made money. Everyone got rich. But eventually home&nbsp; prices started falling. People couldn't refinance&nbsp;&nbsp;
[13:23] anymore. Monthly payments jumped and more and&nbsp; more people just stopped paying. So banks stopped&nbsp;&nbsp; trusting each other. Be sterns went under. Fanny&nbsp; May and Freddy Mack needed a government bailout.&nbsp;&nbsp; And in September 2008, Lehman Brothers collapsed.&nbsp; Credit froze. Stocks crashed. And governments&nbsp;&nbsp;
[13:39] had to step in because a housing problem had&nbsp; ultimately turned into a full-blown banking&nbsp;&nbsp; crisis. This crisis showed that securitization&nbsp; did not remove mortgage risk. Instead, it only&nbsp;&nbsp; hit and spread it while heavy borrowing made&nbsp; the losses much worse around the world. Okay,&nbsp;&nbsp;
[13:54] let's bring all of these lessons into the now.&nbsp; And here's where it gets truly interesting.&nbsp;&nbsp; Because if you were paying attention to every&nbsp; story of a bubble I just covered, you probably&nbsp;&nbsp; noticed something. Crypto and AI might feel like a&nbsp; highlight reel of every single bubble playing out&nbsp;&nbsp;
[14:09] at once. Starting with tulips. Remember the deal?&nbsp; People buying contracts on bulbs still underground&nbsp;&nbsp; priced on nothing but the belief that someone&nbsp; else would pay more tomorrow. Are these meme&nbsp;&nbsp; coins? Are these NFTts? A token with a dog on it&nbsp; backed by no revenue, no product, no cash flow,&nbsp;&nbsp;
[14:25] just a chart in the hope that somebody else shows&nbsp; up after you did. But when the buyer stop coming,&nbsp;&nbsp; there is no flower left to sell. Just a ticker&nbsp; or an image of an animal. Remember the South&nbsp;&nbsp; Sea Company? a venture that looked safe because&nbsp; it had powerful backers in an official story,&nbsp;&nbsp;
[14:40] even though the actual numbers never justified&nbsp; the price. Crypto has had plenty of these projects&nbsp;&nbsp; that rallied hard the moment a big exchange&nbsp; listed them or a well-known name backed them&nbsp;&nbsp; or a government hinted at approval. The backing&nbsp; made people stop asking whether the fundamentals&nbsp;&nbsp;
[14:55] were ever there to begin with. And do you remember&nbsp; the railways? Real technology wildly overbuilt.&nbsp;&nbsp; Most of the companies that built it went broke&nbsp; and the tracks got used for a century anyway.&nbsp;&nbsp; That's the blockchain infrastructure argument.&nbsp; Thousands of tokens and chains have launched.&nbsp;&nbsp;
[15:10] Most of them will disappear completely, but the&nbsp; ones still running through every crash so far,&nbsp;&nbsp; the mining, the settlement, the actual rails keep&nbsp; getting used regardless of what the price is doing&nbsp;&nbsp; that week. Remember 1929, leverage that multiplies&nbsp; your gains on the way up and then forces you to&nbsp;&nbsp;
[15:26] sell on the way down. Crypto didn't just inherit&nbsp; that lesson, it automated it. Perpetual futures,&nbsp;&nbsp; margin trading, leverage tokens. When prices&nbsp; drop, exchanges liquidate positions automatically,&nbsp;&nbsp; which pushes prices down further, which triggers&nbsp; more liquidations. The 1929 margin call became a&nbsp;&nbsp;
[15:43] piece of code that runs itself 24 hours a day. And&nbsp; do you remember Japan? Rising collateral values,&nbsp;&nbsp; letting people borrow more, which pushed prices&nbsp; higher, which let them borrow even more. That&nbsp;&nbsp; loop has shown up inside crypto directly. people&nbsp; borrowing against their coins to buy more coins,&nbsp;&nbsp;
[16:00] using the new coins as collateral for the next&nbsp; coins. It works exactly as well as it worked&nbsp;&nbsp; in Tokyo in 1989, right up until the collateral&nbsp; stopped rising. And the securitization lesson,&nbsp;&nbsp; the one that took down the banking system in&nbsp; 2008, wrapping risk into products so complex&nbsp;&nbsp;
[16:17] that almost nobody holding them fully understands&nbsp; what's underneath. DeFi might have built its own&nbsp;&nbsp; version of this. yield products stacked on other&nbsp; yield products, tokens that represent other&nbsp;&nbsp; tokens collateral borrowed against collateral. It&nbsp; spreads the risk the same way mortgage bonds did,&nbsp;&nbsp;
[16:32] which means it may or may not hide the risk&nbsp; the same way mortgage bonds did. And now to AI,&nbsp;&nbsp; genuinely transformative. Nobody's arguing&nbsp; otherwise, exactly like the internet in 1999.&nbsp;&nbsp; But the same pattern, is it not? Companies get&nbsp; funded on user growth and total addressable market&nbsp;&nbsp;
[16:48] instead of profit. Anything with the letters AI&nbsp; attached gets a premium. the same way anything&nbsp;&nbsp; with.com attached once did. Some of what's being&nbsp; built right now will become this cycle's Amazon,&nbsp;&nbsp; but most of it will disappear the way pets.com&nbsp; did. And right now, nobody can tell you with&nbsp;&nbsp;
[17:04] certainty which is which. So, is Bitcoin the&nbsp; railway? Are memecoins the tulips? Is.ai the&nbsp;&nbsp; new.com? And is DeFi rebuilding 2008 with better&nbsp; branding? Maybe all of it. Maybe none of it.&nbsp;&nbsp;
[17:17] Every asset in this list has true believers&nbsp; who will tell you this time is different.&nbsp;&nbsp; But history has a long undefeated record&nbsp; of proving that phrase wrong. And that's&nbsp;&nbsp; the point of this video, to give you perspective.&nbsp; The most important question isn't which category&nbsp;&nbsp;
[17:32] any of this falls into. It's whether you'd&nbsp; actually recognize the warning signs from&nbsp;&nbsp; everything I just walked you through while you're&nbsp; standing inside of it. But what do you think? Are&nbsp;&nbsp; financial bubbles just an unavoidable part of&nbsp; markets? Are we experiencing one today? Please&nbsp;&nbsp;
[17:47] get highly opinionated in the comments and let us&nbsp; know what you think. And if you want to see more&nbsp;&nbsp; videos on financial history, market crashes,&nbsp; and the forces shaping the global economy,&nbsp;&nbsp; then head over to the Finance Bureau channel&nbsp; and check out our latest video right over here.&nbsp;&nbsp;
[18:02] As always, thanks so much for watching and I'll&nbsp; see you again very soon. This is DC signing off.