The limits of central banking: central banks and financial crises

One of the core purposes of central banks, either explicitly or implicitly in recent times, has been the preservation of financial stability. Yet throughout the last two centuries, when there have been central banks, financial crises (financial instability) have been present. This lecture considers the experiences of: the first great financial crisis of capitalism that of 1825; the worst experience of the Great Depression in the 1930s; and briefly the latest and possibly greatest crisis of 2007/8, in an assessment of the part central banks have played. Forrest Capie is Professor Emeritus of Economic History at the Cass Business School, City University, London. He has taught at the London School of Economics, the University of Warwick and the University of Leeds. He has been a British Academy Overseas Fellow at the National Bureau, New York, a Visiting Professor at the University of Aix-Marseille and at the London School of Economics, and a Visiting Scholar at the IMF. He was Head of the Department of Banking and Finance at City University from 1989 to 1992 and Editor of the Economic History Review from 1993 to 1999. Professor Capie has written widely on money, banking, and trade and commercial policy. He recently completed the commissioned history of the Bank of England (CUP, 2010). His latest book (with G E Wood) is Money over Two Centuries (OUP, 2012). This lecture is the 13th Annual Sir Leslie Melville Public Lecture at The Australian National University