Western Civ A Brief History of Financial Bubbles
Dec 21, 2025
In this engaging discussion, Aman Verjee, a seasoned lawyer and economist with a background at Lehman Brothers and PayPal, delves into financial bubbles. He highlights the warning signs before the 2008 crisis and critiques government policies that exacerbated subprime lending. Verjee examines historical bubbles, including the tulip mania and the tech boom, arguing that some, like the dotcom bubble, ultimately spurred innovation. The conversation turns to AI, assessing its potential and drawing parallels with past telecom bubbles, while advocating for a proactive approach to education and job displacement.
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Incentives Drove Lenders Down Risk Curve
- Mandating mortgage purchases by big agencies changed bank incentives and lowered underwriting standards.
- Once the market shifted, political forces made rolling back these incentives difficult.
Constructive Bubbles Can Seed New Industries
- Some bubbles are constructive, like the 1997–2000 tech boom, which financed lasting tech infrastructure and companies.
- Many firms born in that mania later generated far greater value than the wealth initially destroyed.
Historic Bubbles That Destroyed Wealth
- Aman recounts historical destructive bubbles: Dutch tulips (1636–37) and the 1720 South Sea and Mississippi collapses.
- These episodes wiped out massive wealth and left lasting damage without clear economic benefit.
