In the past, the ease of brewing and erupting financial crises was closely related to the backwardness of information circulation. Inconvenient communication and insufficient transparency created significant information asymmetry in the market, allowing bubbles to accumulate over time without most people noticing. When a crisis erupted, the market reacted slowly, panic spread, and ultimately evolved into a systemic collapse.
Today, smartphones and internet technology have made information transmission instantaneous and widespread. Almost every market participant can grasp news in real time, significantly increasing market vigilance. Small bubbles and localized risks are often quickly cleared by the market before they can expand. From this perspective, it has indeed become more difficult for modern society to experience the traditional type of financial crisis caused by information lag, as seen in the past.
However, this is only part of the story.
The proliferation of information does not necessarily equate to the proliferation of understanding.
As the speed of information circulation increases, most investors are also exposed to an environment of information overload, where it is difficult to discern truth from falsehood. The rapid and mixed information makes market sentiments easier to manipulate, and short-term panic and collective behavior have become more frequent than in the past. The example of the U.S. stock market experiencing four circuit breakers within a month at the beginning of the 2020 pandemic illustrates how excessive instantaneous reactions led to a rapid spread of panic. In the past, crises were caused by slow information; now, sometimes they are exacerbated by information that is too fast.
Deeper risks stem from the complexity and opacity of the financial system itself. The structured products CDO (Collateralized Debt Obligation) and CDS (Credit Default Swap) in the 2008 financial crisis were so complex that even within professional circles, few could fully understand the systemic risks hidden within. Information transparency does not equate to information comprehensibility; rather, the evolution of financial engineering has made the true risks even more concealed.
In summary:
Technology has improved information transparency, diminishing the space for traditional financial crises to brew; however, the high complexity of the financial system and the volatility of collective emotions mean that modern crises may erupt in more concealed, sudden, or even more violent forms.
Vigilance has increased, but what we are combating is no longer simply an information gap, but rather higher-dimensional and deeper structural risks.
In this era, those who possess information are not necessarily able to avoid risks; those who can navigate through the fog are the ones who understand the essence of the system.
