Financial crises, past and present

Financial crises occur with surprising frequency—in every decade in the past century there has been at least one big shock to a major economy’s financial system. Judging from that history, the current upheaval will probably rank among the largest, and we face the prospect of a severe, painful recession. Yet comparing the current financial crisis with those of the 20th century may provide some comfort: the impact of past crises on the real economy was by no means uniform, and it depended, critically, on the way governments acted to recapitalize the banking system and to restore stability and confidence.