Financial innovation has brought new vulnerabilities and is forcing again a change in the financial stability paradigm toward a greater involvement of central banks. The reversal of Glass-Steagall in 1999 set off a leverage race outside the banking system, largely unregulated. As capital markets developed in depth and scope, structured complex products further blurred the distinction between banks, insurance and security firms.
Of course, we should be careful not to assume that investment levels right before the crisis were desirable, as they partly reflected exuberant behaviour. But despite the current low interest rate environment, we are still well below the average numbers for the period 1995-2005 for both public investment and private investment.