4 ideas
Money's value comes from a relationship of trust between debtor and creditor, not from the substance it is made of; Mesopotamian clay tablets recording debts worked as money. Spain's flood of New World silver showed the reverse: extracting more of the metal caused inflation instead of wealth, because silver was only worth what it could buy.
Scottish gambler John Law persuaded the French regent to let him found a note-issuing bank and the Mississippi Company. He then printed paper money to inflate the company's shares while swapping them for royal debt. When investors tried to turn shares and notes back into gold in 1720, the scheme collapsed, wrecking French public finance and souring France on paper money and joint-stock banking for decades.
A state's ability to borrow cheaply through a liquid, trusted bond market let it outspend its rivals in war, more than tax revenue alone could. Britain could fund debt at low rates through Parliament-backed consols, and the Rothschilds' bond network moved funds across borders.
Each generation of financiers has lived through too few crises to price in the fat-tail events that history shows recur regularly. So models built on short, recent data undercount risk. This is why innovations like securitized subprime mortgages or 'Chimerica' capital flows look safe until they fail in ways earlier bubbles would have predicted.