How the World Works
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History

It has happened before

Oil shocks, bubbles, currency crises and inflation have all happened before. Each page tells one episode: what happened, the mechanism behind it, how it ended, and where the same forces are at work in today's news.

Timeline

125 years of crises, shocks and turning points

Scroll sideways to travel in time. Events with an arrow have a full page.

Inflation & oilMarkets & bubblesCurrencies & debtPolicy & the system

19001910192019301940195019601970198019902000201020201907Panic of 19071914WWI: gold standard suspended1923German hyperinflation1929Wall Street crash1939WWII and its debts →1944Bretton Woods1971Nixon ends dollar–gold link1973First oil shock →1979Volcker squeeze →1982Latin American debt crisis1985Plaza Accord1987Black Monday1990Japan's bubble bursts1992Black Wednesday1997Asian financial crisis →1998Russia default, LTCM1999Euro launched2000Dot-com bubble bursts →2008Global financial crisis2010Euro debt crisis2015China devaluation2020Covid crash2022Inflation returns2022UK gilt crisis2026Iran war oil shock →
All events as a list
  • 1907 Panic of 1907: A banking panic in New York; it led to the creation of the Federal Reserve in 1913.
  • 1914 WWI: gold standard suspended: Countries stop converting their currencies into gold to finance the war.
  • 1923 German hyperinflation: Prices in Germany double every few days in late 1923 as the government prints money.
  • 1929 Wall Street crash: The October 1929 crash opens the Great Depression; US output falls by about a quarter by 1933.
  • 1939 WWII and its debts: The Second World War left the US with debt above 100% of GDP and the UK with more than twice that. Neither defaulted or paid it back. Within thirty years both ratios had fallen by about three-quarters, through growth, budget surpluses, and interest rates kept below inflation.
  • 1944 Bretton Woods: Post-war system of fixed exchange rates tied to the dollar, and creation of the IMF and World Bank.
  • 1971 Nixon ends dollar–gold link: The US stops converting dollars into gold; fixed exchange rates break down within two years.
  • 1973 First oil shock: Two oil shocks, in 1973 and 1979, pushed US inflation into double digits and led to the deepest recession since the 1930s. What happened, why inflation took hold, and how it was finally broken.
  • 1979 Volcker squeeze: When Paul Volcker took over the Federal Reserve in 1979, US inflation was above 11%. He let interest rates rise to nearly 20% and accepted two recessions to bring it down. Why it worked, what it cost, and why every central banker still remembers it.
  • 1982 Latin American debt crisis: Mexico cannot service its dollar debts; high US rates trigger a decade of crises in Latin America.
  • 1985 Plaza Accord: The big economies agree to push the dollar down; the yen nearly doubles against it by 1988.
  • 1987 Black Monday: On 19 October 1987 the Dow Jones falls 22.6% in a single day, its worst ever.
  • 1990 Japan's bubble bursts: After peaking at the end of 1989, Japanese share and land prices fall for years: the start of the lost decades.
  • 1992 Black Wednesday: The pound is forced out of the European exchange rate mechanism on 16 September 1992.
  • 1997 Asian financial crisis: In July 1997 Thailand stopped defending the baht. Within months, currencies across East Asia had halved, companies with dollar debts went bust, and Korea and Indonesia needed IMF rescues. How it spread, why borrowing in someone else's currency was the trap, and how Asia rebuilt its defences.
  • 1998 Russia default, LTCM: Russia defaults on its debt; the hedge fund LTCM collapses and is rescued by a group of banks.
  • 1999 Euro launched: Eleven countries adopt the euro, with one central bank, the ECB, setting a single interest rate.
  • 2000 Dot-com bubble bursts: The internet changed the world, and investors were right about that. But share prices ran far ahead of profits. The Nasdaq rose more than sixfold in five years, then lost about 78%. What drove the boom, why it burst, and what it suggests about this year's AI sell-off.
  • 2008 Global financial crisis: Lehman Brothers fails in September 2008; credit freezes worldwide and central banks cut rates to near zero.
  • 2010 Euro debt crisis: Greece needs a bailout in May 2010; spreads soar until the ECB's "whatever it takes" in July 2012.
  • 2015 China devaluation: A surprise cut in the yuan in August 2015 rattles markets worldwide.
  • 2020 Covid crash: Markets fall about a third in weeks in March 2020; governments and central banks respond on a record scale.
  • 2022 Inflation returns: After the energy shock of 2022, central banks raise rates at the fastest pace in decades.
  • 2022 UK gilt crisis: A Budget of unfunded tax cuts sends gilt yields soaring; the Bank of England steps in.
  • 2026 Iran war oil shock: Our coverage of this year's oil shock.
The episodes

Explained in full

1942–1974After WWII: how the US and UK shrank record war debtsThe Second World War left the US with debt above 100% of GDP and the UK with more than twice that. Neither defaulted or paid it back. Within thirty years both ratios had fallen by about three-quarters, through growth, budget surpluses, and interest rates kept below inflation.Lesson: debt shrinks when the economy grows faster than the debt, and someone usually pays through low real returns.1973–1982The 1970s oil shocks: how expensive oil became a decade of inflationTwo oil shocks, in 1973 and 1979, pushed US inflation into double digits and led to the deepest recession since the 1930s. What happened, why inflation took hold, and how it was finally broken.Lesson: an oil shock becomes lasting inflation when expectations shift.1979–1982The Volcker squeeze: how 20% interest rates broke inflationWhen Paul Volcker took over the Federal Reserve in 1979, US inflation was above 11%. He let interest rates rise to nearly 20% and accepted two recessions to bring it down. Why it worked, what it cost, and why every central banker still remembers it.Lesson: credibility is cheaper earned early than restored late.1995–2002The dot-com bubble: when a real technology met an unreal priceThe internet changed the world, and investors were right about that. But share prices ran far ahead of profits. The Nasdaq rose more than sixfold in five years, then lost about 78%. What drove the boom, why it burst, and what it suggests about this year's AI sell-off.Lesson: a real revolution can still be a bad investment at the wrong price.1997–1998The Asian financial crisis: when dollar debt met falling currenciesIn July 1997 Thailand stopped defending the baht. Within months, currencies across East Asia had halved, companies with dollar debts went bust, and Korea and Indonesia needed IMF rescues. How it spread, why borrowing in someone else's currency was the trap, and how Asia rebuilt its defences.Lesson: borrowing in a currency you can't print is the trap.
Looking forward

Scenarios

What history suggests could follow from today's biggest questions. All scenarios →