The Great Leveraging
What can history tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the economy. I term this long---run evolution "The Great Leveraging" and present a ten‐point examination of its main contours and implications.
An earlier draft of this paper was presented at the BIS Annual Conference, Lucerne, 21-22 June 2012. For helpful comments I am grateful to conference participants, and especially to my discussants, Barry Eichengreen and Y. Venugopal Reddy. This paper draws on recent work with collaborators, whom I thank; but the views expressed are those of the author alone, and the responsibility for interpretation, and any and all errors, is mine. Alan Taylor served as a Senior Advisor at Morgan Stanley in 2010-11, and has received compensation for presenting research findings at private and public sector meetings. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Taylor, A. M. “The Great Leveraging.” In The Social Value of the Financial Sector: Too Big to Fail or Just Too Big? edited by V. V. Acharya, T. Beck, D. D. Evanoff, G. G. Kaufman, and R. Portes. World Scientific Studies in International Economics, vol. 29. Hackensack, N.J.: World Scientific Publishing, 2014.