Financial crises are not a new phenomenon. We had them in the 18th century; there were several well-known ones in the 19th century, not to mention the crisis which started the Great Depression of the 1930s. The recurrence of financial crises in the last decades has revoked a wave of research on the topic among economic historians and economists. Still, it has been difficult for us to really understand how these crises emerge, why they have been so severe recently and why they have occurred so often in the last decades. This paper tries to explain the phenomenon by asking, how is, and how was the volume of money stock determined, and why does scarcity of money, and thus rising interest rate, not check excess borrowing and creation of speculative bubbles - and then emerging crises.
