In the past, the reason why financial crises were easy to brew and break out was closely related to the backwardness of information flow. Inconvenient communication and lack of transparency led to huge information asymmetry in the market, and bubbles could accumulate for a long time without being noticed by most people. When the crisis broke out, the market reacted slowly, panic spread, and eventually evolved into a systemic collapse.
Today, smartphones and Internet technology make information transmission instant and universal. Almost every market participant can get the news at the first time, and the market alertness has been greatly improved. Small bubbles and local risks are often cleared by the market quickly before they expand. From this perspective, it is indeed more difficult for modern society to have the traditional financial crisis caused by information lag in the past.
But, that’s only part of the story.
The popularization of information does not necessarily mean the popularization of understanding.
As information flows faster, most investors are also exposed to an environment of information overload and difficulty in distinguishing true from false. Information is too fast and too complex, making market sentiment easier to manipulate, and short-term panic and group behavior more frequent than in the past. In the early days of the epidemic in 2020, the U.S. stock market had four circuit breakers in just one month, which is an example of the market's excessive and immediate reaction leading to the instant spread of panic. In the past, crises were caused by information being too slow; now, sometimes crises are exacerbated by information being too fast.
The deeper risks come from the complexity and black box nature of the financial system itself. The structured products in the 2008 financial crisis - CDO (collateralized debt obligations) and CDS (credit default swaps) - even in the professional circle, few people can fully understand the hidden systemic risks. Information transparency does not mean that the information is understandable. The evolution of financial engineering has made the real risks more hidden.
In summary:
Technology has increased information transparency and reduced the space for traditional financial crises to develop; however, the high complexity of the financial system and the volatility of group emotions make it possible for modern crises to erupt in more hidden, sudden, and even violent forms.
Vigilance has increased, but what we are fighting against is no longer a simple information gap, but higher-dimensional and deeper structural risks.
In this era, people who have access to information may not necessarily be able to avoid risks; those who can truly see through the fog are those who understand the essence of the system.
