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Control in an Economic System

In: Why Bank Panics Matter

Author

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  • Frederick Betz

    (Portland State University)

Abstract

As we have seen in the example of the 1857 panic, bank panics occur in a common pattern. There is a price disequilibrium in a capital asset market, created by speculators’ reflexivity about future prices and their use of excessive leverage—increasing prices unto a financial bubble which grows and finally bursts. Then the banks which funded the speculation suffer bank runs, as their assets fall in the “debt deflation” from the bubble. And before 2007, this pattern had been identified in the economic writings of Fisher, Keynes, Minsky, and Soros. So why was this pattern a surprise again in 2007?

Suggested Citation

  • Frederick Betz, 2014. "Control in an Economic System," SpringerBriefs in Economics, in: Why Bank Panics Matter, edition 127, chapter 0, pages 45-65, Springer.
    • Handle: RePEc:spr:spbchp:978-3-319-01757-0_5
    DOI: 10.1007/978-3-319-01757-0_5
    as

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