If we mistakenly believe that we could discover excessive risk accumulation through observing specific indicators, or that macro-prudential policies could be mightily effective in achieving financial stability, such complacency could itself become another source of instability.
Let me illustrate the importance of avoiding a false sense of security, by telling you the story of the world’s deepest tsunami breakwater at Kamaishi port in northern Japan (Fig. 11). At 1,960 meters long and 63 meters deep, it was celebrated as the deepest breakwater in the world by Guinness World Records when it was completed in March 2009.