Episode summary
The Counterintuitive Rule That Could Beat the Market
The Meb Faber Show
· · 41 min · Hosts: Meb Faber · Guests: Liaquat Ahamed
Summary
Liaquat Ahamed argues that the Panic of 1873 was the world’s first truly global financial crisis because it linked Europe, the US, and emerging markets through a single boom in railroads, bonds, and cross-border capital. He traces the pre-crash expansion to Britain and France, where falling real rates and a new class of savers pushed money into infrastructure and railroad finance, much of it underwritten by the Rothschilds.
He says the bubble turned into a mania after 1870, especially in Germany, where French war reparations flooded the economy and helped spark a wave of IPOs and speculative excess. The crash then spread in stages: Vienna’s stock market collapsed, Jay Cooke and Company failed in the US, and railroad defaults rippled across the country. Ahamed says the decisive mistake was monetary: countries abandoned silver and concentrated on gold, creating a shortage of safe assets and a long deflation that lasted roughly 20 years.
Ahamed draws parallels to modern crises by stressing that deflation punishes debtors, farmers, and households while fueling political backlash and conspiracy thinking. He links 1873 to Japan’s lost decades and to post-2008 populism, and he says today’s biggest vulnerability may be the size and reach of the US stock market rather than public debt alone.
Key takeaways
- Ahamed says 1873 was the first truly global financial crisis, with spillovers from Europe to the US and emerging markets.
- He argues the boom was driven by British and French capital chasing railroads and infrastructure, with the Rothschilds at the center of global bond finance.
- He says Germany’s postwar reparations helped create a stock-market mania and one of the first IPO bubbles.
- Ahamed считает the switch away from silver intensified the crash by creating a shortage of safe assets and 20 years of deflation.
- He says the modern risk is not just debt, but a U.S. stock market worth about $80 trillion, or more than 250% of GDP.
Notable quotes
“1873 was truly a global financial crisis. It affected Central Europe, it affected the US, and it affected what were then emerging markets”
“So this was a boom built on bond investments and built by investors in bonds”
“Everyone flew into the flame, the shrewd capitalist and the inexperienced petty bourgeois, the general and the waiter, the woman of the world, the poor piano teacher and the market woman”
“it was essentially a massive two to three year set of IPOs across Germany. And it covered mostly banks, railroads, but all sorts of companies”
“Deflation is very simply too little money chasing goods. Everyone hates inflation cuz suddenly everything's more expensive and people actually have not experienced deflation, but people hate deflation as much”
How the episode opens
Welcome to a special series of the Meb Faber Show on the past, present, and future of America. I'm sitting down with some of the most notable historians, thinkers, and investors in US financial history, all tied to my new coffee table book, Investing in America, The Rise of a 250-Year Bull Market, out July 4th.
Meb Faber is the co-founder and chief investment officer of Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Welcome back everybody. Today we have an awesome episode. I'm so excited.
Today's guest is Liaquat Ahamed, the Pulitzer Prize-winning author Lords of Finance, everyone's favorite book, one of the great financial history books ever written. He's out with a new book, 1873, The Rothschilds, The First Great Depression and the Making of the Modern World. It's a prequel in many ways to Lords of Finance, the story of the world's first truly global financial crisis.
Liaquat, welcome to the show.
Thank you, Meb. Your first book, most investors had kind of heard about the Great Depression. Not as many people that lived through it still kicking around today, but I feel like that that one seared in the brain. 1873, less probably name familiarity with it. What was And And you mentioned this is kind of one of the the first truly global crisis. Talk to us about why this story, why now?
1873 was truly a global financial crisis. It affected Central Europe, it affected the US, and it affected what were then emerging markets. It had so much resonance with the modern era because of these multiple financial crises.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- 1873 crisis
- credit bubbles
- gold vs silver standard
- deflation vs inflation
- selling too early
Companies and tickers mentioned
- Rothschild & Co
Watch the episode
Watch “The Counterintuitive Rule That Could Beat the Market” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
