In chapter 3, preparing for crisis, the narrative begins. It is told mainly chronologically and this chapter deals with the period between May 11 and May 19, but only after a brief focus on January 1931 where Harry Siepmann on the basis of the socalled Bagehot model considers what to do in case of a major financial crisis in Europe. The Bagehot model for a lender of last resort and its inadequacy in the face of an international crisis, is a theme that goes through the book’s narrative. On May 11 the Credit Anstalt failure is made known and the central bankers get ready to make sense of the information they get from Austria and elsewhere. The BIS sends Francis Rodd to Vienna and the chapter follows him closely as he communicates his findings back to the BIS and Bank of England. In a world where debt is abundant and credit scarce, Rodd presents a plan to the upcoming BIS board meeting.

Chapter 1 discusses the shift in Britain’s paper currency from being backed by the metallic standard to becoming an inconvertible currency. It explains how Britain’s war against Revolutionary France disrupted the nation’s fiscal and monetary system, leading to the provincial financial panics that preceded the financial crisis of 1797. This chapter highlights the declaration movement, a nationwide phenomenon where people declared their acceptance of paper currency as money. The movement was not limited to the metropolis and English financial centres, but also occurred across English provinces, Scotland and Ireland. This chapter examines the participants of the movement and argues that its success was due to its inclusive nature, which united people despite their geographical, political and economic differences. It concludes that the declaration movement represented the currency voluntarism that Edmund Burke identified as a key aspect of Britain’s democratic monetary system. This belief in the communal and voluntary nature of currency circulation facilitated the transition to the new regime of inconvertible paper money.

Bob Medearis, Roger Smith, and Bill Biggerstaff founded Silicon Valley Bank in 1983. Smith ran the Bank as a startup business in the first decade. Subsequent CEO John Dean restructured the Bank and Ken Wilcox redirected the Bank with a central focus on exclusively serving the tech community. Greg Becker accelerated the Bank, connecting its past to the future. The bank’s assets grew at a fast pace during the pandemic. Becker tripled the size of the bank between 2019 and 2022.

Financial crises have occurred repeatedly throughout history. This chapter starts by exploring the different types of crises: banking crises, sovereign debt crises, and currency crises. A banking crisis indicates that a significant part of a country’s banking sector has become insolvent after heavy investment losses, banking panics, or both. A sovereign debt crisis/default occurs when a government fails to meet interest or principal payments on its debt obligations. Finally, a currency crisis causes the value of a country’s currency to fall precipitously. The chapter provides facts and figures about financial crises, and discusses some theoretical models. A first set of models is related to the liability side of banks. Since banks use short-term deposits to finance long-term loans, they are vulnerable to massive withdrawals cumulating in a banking run. A second set of models looks at the asset side of banks. Shocks to fundamentals (e.g. a collapse in real estate prices or increased bankruptcies in the non-financial sector) can upset the business cycle, resulting in deteriorating asset quality that can trigger further banking problems.