Particularly troubling is the unusually high level of long-term unemployment: More than 40 percent of the unemployed have been jobless for more than six months, roughly double the fraction during the economic expansion of the previous decade. Uncertain job prospects, along with tight mortgage credit conditions, continue to hold back the demand for housing.
Even if we are successful in the end we cannot be sure we have identified all relevant risks, because “unknown unknowns” could also exist in another area of the financial system which we do not observe. In my view, therefore, complexity reduction might be an effective instrument for preventing systemic crises.