Banking and Financial Circuits and the Role of the State
Edited by Louis-Philippe Rochon and Mario Seccareccia
Chapter 7: When wolves cry ‘wolf’: systemic financial crises and the myth of the Danaid Jar
Ovid, Horace and Baudelaire all wrote poems about it. Salieri based an opera on it. Rodin and many other artists found inspiration in it – as did Keynes, whose use of it as a metaphor in his Treatise on Money drew Hayek’s ire. And in France, under the July Monarchy, it was brilliantly adapted by a gifted caricaturist to satirize how the government of Louis Philippe funneled the taxes of the French people to banks (Figure 7.1). The myth of the Danaid Jar thus seems a perfect departure point for our reflections on comparative bank bailouts in honor of Alain Parguez, whose attention to economic history is a distinctive feature of his research program. The myth recounts the sad story of the daughters of Danaus. Forced to marry against their will, all but one murdered their husbands on their wedding night. As punishment, they were sent to Hades and condemned forever to try to fill with water a jar that was really a sieve. Systemic banking crises strikingly resemble the jar in the myth. The difference is that they only seem to last forever – they do finally come to anend once the financial system is fixed. But that takes years. In the meantime, ordinary citizens pour tax dollars into banks owned mostly by people far richer than they are, while enduring higher rates of unemployment and enormous output losses.
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