ABSTRACT
Financial instability, both in its cyclical manifestations as a trigger for recessionary adjustments and in the course of long waves as a key force behind stagnation and restructuring, is an endemic feature of capitalist economies. Ever since the Great Depression, which started with a stock-market crash in 1929 and eventually culminated in the collapse of the entire credit system, we have taken those manifestations of crisis quite seriously and used government intervention to deal with them. Roosevelt’s money and banking reforms of 1933—35 imposed a number of regulatory restrictions on America’s financial system that provided for more stable securities exchanges and tightly circumscribed banking activities (see chapter 1). Commercial banks, for instance, were prohibited from engaging in price competition, nationwide branching, or bank-related activities such as investment banking. In return they had, as the only type of financial institution capable of money creation, the privilege of access to deposit insurance, to emergency funds from the Fed’s discount window, and to the Fed’s payments services (e.g., check clearing, fund transfers). 1
