Unemployment is up, businesses have closed, and the direct and indirect costs to the taxpayer have resulted in fiscal deficits in several countries of over 10% of GDP – the largest peacetime deficits ever. At the heart of this crisis was the expansion and subsequent contraction of the balance sheet of the banking system. Other parts of the financial system in general functioned normally. And we saw in 1987 and again in the early 2000s, that a sharp fall in equity values did not cause the same damage as did the banking crisis. Equity markets provide a natural safety valve, and when they suffer sharp falls, economic policy can respond. But when the banking system failed in September 2008, not even massive injections of both liquidity and capital by the state could prevent a devastating collapse of confidence and output around the world. So it is imperative that we find an answer to the question of how to make our banking system more stable. As Bagehot knew only too well, banking crises are endemic to the market economy that has evolved since the Industrial Revolution. The words “banking” and “crises” are natural bedfellows. If love and marriage go together like a horse and carriage, then banking and crisis go together like Oxford and the Isis, intertwined for as long as anyone can remember. Unfortunately, such crises are occurring more frequently and on an ever larger scale. Why? 2.
Krzysztof Rybiński: Monetary policy challenges resulting from the rapid credit growth in the CEE Panel discussion by Mr Krzysztof Rybiński, Deputy President of the National Bank of Poland, at the National Bank of Poland International Conference of Central Bankers and Economic Educators “Monetary Policy Challenges Resulting from the Rapid Credit Growth in Converging Economies”, Warsaw, 23 November 2007. *  *  *  Ladies and Gentlemen, In recent years we have witnessed a rapid growth of credit in CEE countries. Today, I would like to focus on globalisation as one of the main causes of such development. First, I will explain how globalisation contributed to recent credit growth in the CEE and then I will discuss what could be the possible consequences for the monetary policy of vanishing globalization “tail wind” in the nearest future. To start with, let us define the term globalisation, as its meaning is so broad, that when it is referred to in a discussion, various people understand various things. One of the definitions of globalisation is provided by the International Monetary Fund 1 , where it is construed as “the growing interdependence (integration) of national economies, in particular as a result of the growing international trade and financial flows”. Moreover, an element of globalisation that is worth mentioning is the fast flow of information and knowledge, which is the driving force behind globalisation processes. One should keep in mind that globalisation is not a completely new phenomenon.