Ten years since the start of the last banking crisis, we have to ask ourselves – when will the next one happen?

It is 10 years since the start of the last banking crisis, so when’s the next one coming? It’s not hard to see signs of potential stress around the world. There are the booms in property prices in several major markets, including the UK. There is the surge in consumer debt pretty much everywhere. And everyone knows that sooner or later global interest rates will have to rise – the moment at which latent stress becomes real stress. As Warren Buffett famously observed: “Only when the tide goes out do you discover who’s been swimming naked.”

To most people is must seem monstrous that there should be any danger of another banking crisis, or even the need to hold interest rates down in order to prevent it. That “cure” of near-zero, or even negative interest rates is almost worse than the disease. It has denied savers a decent return on their money, made home ownership impossible for many, and increased inequality by boosting the value of the assets of the wealthy.

Yet financial crises of some sort or other seem to occur at roughly 10-year intervals. That is one of the extraordinary observations in a new history of the Bank of England, just out this week. It is called Till Time’s Last Stand and it is by David Kynaston, best known for his series of books on post-war Britain. Consider this comment, written by a well-known financial journalist, after there had been a change in banking legislation: “The great wish on the part of the English people as to currency and banking is to be safe.”

That was Walter Bagehot, writing in 1844 about the new Banking Act, just ahead of yet another financial crash, this time triggered by sudden fall in the value of American railway shares, an early example of Britain being affected by a US banking crisis. Gradually the Bank of England learnt that it was cheaper and less disruptive to find some way of rescuing banks that were in danger of collapsing, rather than letting them go down. But this led to the accusation, familiar right now, that banks get special treatment from the powers-that-be.

After the Baring crisis in 1890, Kynaston observes: “Ultimately, the lesson of the crisis was that the establishment would always do its best to look after its own; and nowhere more than in the City…”

We think of the great financial crisis of 2007/8 as an extraordinary event, and indeed it was. But while the damage was huge, reading through Kynaston’s account of the past 320 years, in its characteristics it is remarkably commonplace. In our recent memory there has been the secondary banking crisis of the early 1970s, the less developed country debt one of the early 1980s, and the collapse of BCCI in 1991. The final chapter is titled “You just don’t know when”, which neatly sums up the dilemma facing bank regulators. You could construct a totally safe banking system but it would be unable to make much credit available to potential borrowers.

Take home loans. You would say that anyone wishing to get a mortgage would have to have saved for five years with the bank in question and then could only borrow 80 per cent of the property’s value. That was pretty much the situation in the 1950s in the UK, if you went to a building society. The banking regulators around the world have chosen to make banks much safer by requiring them to increase their capital (though in Europe there are still a number of under-capitalised banks that may need to be rescued). But the central banks have had to compensate for restrictions on lending caused by tighter regulation by holding interest rates at unprecedentedly low levels. At no time since 1694, the year the Bank of England was founded, indeed at no time in recorded history as the Bank’s chief economist Andy Haldane has observed, have interest rates been as low as they are now. This cannot be right.

So where will the next financial crisis come from? David Kynaston is an historian, not a financial commentator, and he is certainly not in the prediction business. But the regularity of the crises he charts would suggest that we should expect something to go wrong in, say, the next five years. (He notes in the book they usually come in the autumn.)

Where should we look? They can come from anywhere in the world. Over the past 200 years they have frequently started in the US, but they could equally now start in China. It is after all the world’s second largest economy. Or they could start in cyberspace. What would be the knock-on effects were bitcoins to become worthess? Or maybe, and this is my prime concern, suppose there is a loss of confidence in the debt of a major sovereign borrower, leading to a surge in bond yields and a large developed country defaulting?

Actually the recent story that for me rings the loudest alarm bell is that US investor optimism is at a 17-year high, the highest it has been since 2000, just as the dot-com bubble was about to burst. It is the Wells Fargo/Gallup Investor and Retirement Optimism Index – retirees are particularly optimistic, it seems. That is odd; they should have the longest memories. What I think can be said, though, is that the next financial crisis will not be as serious as the last one. On a long view, while crises do crop up about once a decade, really big ones only come along every half-century or so. Since we have had a big one in 2007/8, maybe those retirees are half-justified in their upbeat view of the world.