In turn, financial institutions, knowing the risks posed by a run, began to hoard cash, which dried up liquidity and significantly limited their willingness to extend new credit. 3 Because the runs on the shadow banking system occurred in a historically unfamiliar context, outside the commercial banking system, both the private sector and the regulators insufficiently anticipated the risk that such runs might occur.
In such a world, a renewed focus on the processes in the real economy which generate growth in productivity could also be apt.