HOW LONG UNTIL THE NEXT FINANCIAL CRISIS? Alex J. Pollock, who was president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004, had an interesting article in the Wall Street Journal (July 10) asking how long it would take for the next financial crisis, taking into account the reforms which have been implemented to attempt to avoid another one. Pollock notes that it is now five years since 2009, which he takes as the end of the last financial crisis. He thinks that, based on historical averages, the next crisis can be expected in 2019—five years from now.
Pollock recounts the many lesser crises which he saw in the 25 years since 1989. However, his chief support for the ten year average is based on the opinions of two wise men. Charles Kindleberger, a great (and very readable) economic historian, looked at the record of several centuries for his conclusion that crises occur on average every 10 years. Pollock also quotes Paul Volcker that “about every 10 years, we have the biggest crisis in 50 years”.