Sublime

Governments cannot run deficits in excess of the growth in GDP without eventual consequences. As we will see in the chapter covering the research of Rogoff and Reinhart, things go along well until Bang! bond investors lose confidence in the ability of a government to pay its debt, even if that debt is denominated in a currency the government can pr

excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Infusions of cash can make a government look like it is providing greater growth to its economy than it really is.

The fact is that banking crises have long plagued rich and poor countries alike. We reach this conclusion after examining banking crises ranging from Denmark’s financial panic during the Napoleonic Wars to the recent first global financial crisis of the twenty-first century. The incidence of banking crises proves to be remarkably similar in the hig