124 Systemic Banking Crises

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An IMF paper identifies 124 systemic banking crises worldwide between 1970 and 2007. A systemic crisis is system-wide, not due to the failure or mismanagement of one or a few banks. I can think of no other industry, and some have pretty poor records, with such a sorry record. This is strong evidence that the central bank + fractional reserve + insured + conglomerated + mis-regulated banking industries everywhere have a structure that is fundamentally flawed. And this structure brings entire economies down periodically wherever it exists. The paper, in restrained language, identifies central banks as one of the culprits, among others, in the recent crisis:

“At the time of writing of this paper, the underlying causes of the global 2007-2008 financial crisis are still being debated, and most likely can be attributed to a combination of factors. However, from the perspective of describing its initial conditions, it is useful to classify the underlying factors in two groups: macroeconomic and microeconomic factors.

“The macroeconomic context is characterized by a prolonged period of excess global liquidity induced in part by relatively low interest rates set by the Federal Reserve Bank and other Central Banks following the 2001 recession in the United States. The excess liquidity fueled domestic demand and in particular residential investment, triggering a significant rise in housing prices which more than doubled in nominal terms between the year 2000 and mid-2006.”

7:47 am on October 23, 2011