Abstract
This study analyzes whether financial crises happen due to excessive debts or due to inflation. Despite the fact that debts and inflation could cause instability in the economy, they have different influences on the financial sector. Debts lead to fixed commitments for households, companies, banks, and governments. If there are problems in repaying these commitments, they could cause losses for lenders, banks, investors, and credit markets. Inflation affects people's ability to purchase goods and services; this leads to a necessity to increase interest rates. Through the comparative analysis of four cases of financial crisis (Global Financial Crisis 2008, inflation crisis of 1970s, European sovereign debt crisis, Latin American debt crisis), the paper tries to prove the idea that debts are the main cause of financial crises because they directly lead to these crises. It does not mean that the consequences of the inflation can be neglected, but it acts as an accelerator for financial crises.