The financial panic of 2007–2009 was enough to demonstrate to financial professionals and policymakers the importance of learning from history—including recent history. Readers of Financial Stability will develop a firm grasp of how crisis situations developed in the past and how to use markets to gauge the threat to the future. Financial disruption can be avoided by illuminating and removing conflicts between economic and political interests. By explaining financial stability from analytic, historical, philosophical, legal, accounting, and market perspectives, authors Frederick L. Feldkamp and R. Christopher Whalen uncover an elegant solution to the problem of financial volatility.

From disputes described in Biblical times all the way to the most recent collapse, financial crises throughout history all have a single cause: the hidden leverage and bad debt caused by various types of fraud. That is the basic claim of Financial Stability and, drawing on analysis of 27 years of data, the authors present a remarkably compelling case. After building a firm foundation of historical examples, they reveal a theory of financial stability that is in some ways remarkably simple. The theory does not lack nuance, however, as readers will quickly discover as they work through the mathematical proofs in Financial Stability.

Only a few years after the Great Recession, investors have already begun to realize that free markets have the capacity to narrow credit spreads and stabilize equity markets. Financial Stability outlines the indisputable logic behind this fact, providing a basis from which we can responsibly provide liquidity to accommodate past errors and move forward with a firmer footing.