Recent turbulence in the US and global financial systems has riveted public attention on financial crises: their recurrence, the damage they inflict,

From Panic to Prudence

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2023-03-22 13:30:08

Recent turbulence in the US and global financial systems has riveted public attention on financial crises: their recurrence, the damage they inflict, and the calls to prevent them. Silicon Valley Bank, Silvergate Bank, Signature Bank, and Credit Suisse have lit up the media as possible precursors to systemic instability. It’s impossible to say what will happen next, but to paraphrase Voltaire, God is not on the side of the central banks’ big balance sheets, but on the side of the most adroit crisis responders.

Surprise about financial crises is, well, surprising. We’ve seen versions of this movie before—in fact, many times. But what have we learned? What can we learn from the history of financial crises? They seem so idiosyncratic as to bar generalization. However, I argue that one can learn a lot.

In The Panic of 1907: Heralding a New Era in Finance, Capitalism, and Democracy (2023), Sean Carr and I tell the dramatic story and present new findings by us and some four dozen studies published since our first edition in 2007. This look into the past helps to inform the present and one’s outlook to the future.