[5] The global financial crisis was not a purely exogenous event. Fault lines had been building up in the global financial system (Rajan 2011). Banks were heavily undercapitalised, given the amount of risk they had loaded onto their balance sheets. Ex-ante insurance failed because of overly optimistic expectations concerning the financial system’ ability to absorb adverse shocks.
These dangers were ascribed above all to the unsustainable global imbalances and their tendency to be absorbed suddenly, entailing sharp fluctuations in output in the main economic areas and their reciprocal exchange rates. When repeated warnings are issued about dangers that never seem to materialize, it is almost inevitable that they will eventually be ignored.