Prologue

Abstract

Financial crises, like the poor, will always be with us. Kindleberger, author of the classic Manias, Panics and Crashes, described financial crises as “a hardy perennial.”¹ The modern capitalist system, despite all its positive results, produces financial crises at a steady rate. Some of these are relatively harmless and limited to a single country or small region, while others are much more insidious and can cause great harm. Crises that pose a threat to the global financial system are labeled systemic. Since the end of the Second World War there have been a number of such inflammable crises, the most recent and most dangerous of which started in the summer of 2007. The modern history of financial crises is riddled with lessons learned, not learned, ignored, or forgotten. While the focus of this book is on systemic crises since 1995, it is instructive to recall in a succinct manner the experience with crises of a few decades earlier.