The response of macroeconomists-those who study the workings of national economies-in the 1930s was strikingly different from attitudes today. Economists therefore faced the challenge of providing policy prescriptions that could prevent a repeat of these traumatic experiences. In each case, insufficient regulation of the banking system was held to have contributed to the crisis. Problems in the banking sector played a critical role in triggering and prolonging the two greatest economic crises of the past 100 years: the Great Depression of 1929 and the Great Recession of 2008.
1īanks create new money when they lend, which can trigger and amplify financial cycles
