WICKSELL ON THE AMERICAN CRISIS OF 1907

Mauro Boianovsky

Journal of the History of Economic Thought, 2011, vol. 33, issue 2, 173-185

Abstract: The article discusses Knut Wicksell’s interpretation of the American crisis of 1907, which he presented in a piece published in Swedish in 1908. Wicksell advanced, probably for the first time in the literature, a clear distinction between the “solvency” and “liquidity” of banks, and discussed its implications for the interpretation of crises. Moreover, he called attention to a third desirable attribute of a bank: “flexibility”; that is, the ability to satisfy credit demand at an adequate rate of interest. Wicksell linked that with his better known concept of the cumulative process and the stabilization policy associated with it.

Date: 2011
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