Introduction

This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book examines the history of financial crises in the postwar US economy. The method of examination employed, dictated by the nature of the subject matter to be investigated, is institutional, dynamic, and historical. The book discusses the process of generalizing and interpreting that experience by formulating a business-cycle model of financial crises. It considers several noncyclical theories of financial crises. The book examines the business-cycle model by systematically comparing it to the history of financial crises and to time-series data since 1961. It helps to understand the changing nature of financial crises in the United States by putting them into the context of the establishment and subsequent erosion of a "system of financial regulation". In a demonstration of the increasing interconnection among the world's financial markets, the crash spread worldwide.