“Be optimistic about the boom, but don’t buy the stock.” — Liaquat Ahamed on the AI bubble

Yesterday, Alexander Starritt argued that the 2008 financial crash ruined the lives of his generation. But compared with the great crash of 1873, 2008 looks like a tremor. The Pulitzer Prize-winning economic historian Liaquat Ahamed has a new book out today, 1873, which presents this 19th century economic crash as the first truly global financial crisis.

In 1870, three globalising infrastructure projects were completed in quick succession: the US transcontinental railroad, the Suez Canal, and the Trans-India railroad linking Bombay to Calcutta. Into this newly integrated global economy, the Franco-Prussian War injected a trillion-dollar-equivalent indemnity that the Rothschilds helped France raise — and the resulting dramatic capital flows produced three simultaneous bubbles in Berlin, Vienna, and New York. A French journalist named Jules Verne worked out that for the first time, you could circumnavigate the globe in less than eighty days. Around the world in one global economic crisis.

The lesson for posterity, Ahamed warns, is that the authorities made a catastrophic error by doubling down on the gold standard, producing decades of deflation that triggered an anti-semitic and anti-globalist populism, and ultimately led to the Great Depression of the 1930s. So what does that tell us about today’s AI boom, which is about to be rocketed by three trillion-dollar IPOs? Be optimistic about the boom, the wise Ahamed says. But don’t buy the stock.

Five Takeaways

• Jules Verne and the First Global Economy. In 1870: the transcontinental railroad, the Suez Canal, the Trans-India railroad. A French newspaper said you could now circle the globe in under eighty days. Jules Verne read the article. The first integrated global economy produced the first global financial crisis.

• The Trillion-Dollar Indemnity and Three Bubbles. France paid Germany the equivalent of $1.2 trillion under the Franco-Prussian peace treaty. The Rothschilds helped raise it in six months. Berlin and Vienna equity markets rose 200–300%. US railroad bubbles inflated further. A third bubble in foreign borrowing. Three bubbles, one crash.

• The Wrong Lesson: Gold Standard Orthodoxy. The authorities concluded that the gold standard had worked — because the boom had happened under it. They failed to see that the crash itself was partly caused by gold standard rigidities. The resulting deflation produced anti-globalist populism. The same orthodoxy caused the Great Depression.

• The Rothschilds: Scapegoated Despite Being Innocent. Presciently cautious during the bubble’s final speculative phase. When the crash came, viciously scapegoated — part of the wave of antisemitism that swept Europe. Financial panic turns into political persecution.

• The AI Boom: Be Optimistic, Don’t Buy the Stock. Every bubble from 1873 to 1929 to dot-com was rational until the last phase. The dilemma: the irrational phase may still produce 40% gains. Ahamed’s advice: be optimistic about the AI boom. It reflects real productivity growth. Don’t buy the stock.

About the Guest

Liaquat Ahamed is a financial historian and the author of 1873 (Penguin Press, June 2, 2026) and Lords of Finance (Pulitzer Prize, 2010). He lives in Washington, D.C.

References

1873 by Liaquat Ahamed (Penguin Press, June 2, 2026): penguinrandomhouse.com/books/306461/1873-by-liaquat-ahamed
Lords of Finance by Liaquat Ahamed (Pulitzer Prize, 2010)

About Keen On America

Nobody asks more awkward questions than the Anglo-American writer and filmmaker Andrew Keen.

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Chapters:

00:00:31 Introduction: Starritt’s 2008 vs Ahamed’s 1873
00:02:05 What makes financial crises exciting?
00:04:58 Why is 1873 the first Great Depression?
00:07:08 Jules Verne and the first global economy
00:10:04 The Franco-Prussian War and the trillion-dollar indemnity
00:11:00 The Rothschilds raise $1.2 trillion in six months
00:12:00 Three simultaneous bubbles
00:25:00 The Rothschilds: scapegoated despite being innocent
00:35:00 Deflation and the wrong lesson
00:50:00 Did 1873 cause the First World War?
00:56:27 The AI boom: should we buy Anthropic and OpenAI?
00:59:03 Be optimistic. Don’t buy the stock.