It was prescient in drawing parallels with the financial developments in the 1920s that preceded the 1930s depression. 2 The 1880s were characterised by rapid population growth and increased urbanisation which fostered an investment boom dominated by construction. There was a spirit of optimism, which saw international capital flow in and asset prices – particularly land prices – increase.
Leverage rose and lending standards fell. As Shann’s monograph noted, financial regulation at the time abetted the excesses, including an “untimely amendment” of the Victorian Banking Act in 1888, which allowed borrowing against a wider range of collateral. In the 1920s, when Shann was applying this experience to contemporary issues, the problem was not so much excessive private debt or poor regulation.