But even this was hard to foresee as a devastating problem. As a country moves away from under-developed financial “repression”,10 it is both inevitable and desirable that the depth of the financial sector increases - i.e. the balance sheets of financial institutions expand faster than nominal GDP. That said, of course there is an issue of “how much faster”?
Less excusable are the inadequate efforts to put in place effective prudential supervision. Coincidence and compounding I have argued, so far, that none of the elements which are usually put forward is, in itself, all that unusual, or enough to explain the extent of the crisis.