This conclusion is not borne out by the rapid growth in both the number of bank accounts and the real value of bank deposits over the last 10 years. Notwithstanding the strides made by the banking industry, it still faces major challenges. The cost of doing banking business is high, partly because the industry has not yet realised optimal economies of scale.
This episode, where mass speculation led to the dramatic rise and subsequent collapse in the price of tulip bulbs, illustrates that asset-price bubbles can have serious repercussions for a country’s economy when they burst. There has been a tendency recently, particularly in the United States, to ask whether central banks “should try to pop bubbles when they see them, before they get too large”.