THE DEBT BURDEN AND FINANCIAL REGULATION
If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.
—JOHN MAYNARD KEYNES
How do financial crises occur? In 2007, the American economy was booming. People were making money. They were buying homes and expensive cars. The stock market was active. Everyone planned to be wealthy.
But if you look more deeply, there were warning signs. Too much borrowing, homes sold to people who couldn’t afford them, greedy banks eager to cash in, credit rating agencies overstating value, regulators not putting on the brakes, and then, suddenly, Lehman Brothers collapsed, the financial system threatened to freeze, and the world economy began to lose trillions of dollars.
No one ...