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We may end up with a world based more on equity than debt, or more on market debt instruments than bank intermediation; but how and why we get there is a mystery.

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Eventually the banking systems of all advanced economies reach magnitudes of 500 percent,
ALAN M. TAYLOR

Advance All Bank Economic Eventually Magnitude Percent Raech System
In the immediate postwar era, financial crises in advanced countries were rare events, and before 1970 did not happen at all.
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Advance All Before Country Era Event Financial Happen Immediate
1000 percent or more of GDP, so that every economy starts to have financial systems that resemble recent cases like Switzerland, Ireland, Iceland, or Cyprus. That might be a very fragile world to live in.
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Country Economy Financial Fragile Live More Percent System World
We have never in human history seen a run-up in credit of the kind we have just witnessed in advanced economies since 1970.
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Advance Credit Economic History Human Witness
Non-trivial understanding of the financial sector, credit, and the banking system.
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Bank Credit Financial Non Sector System Trivial Understanding
If we have moved back to a regime of regular financial crises – like the one we had from the 1870s to the 1930s.
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Crise Financial Move Regime Regular Since Year
It’s just very hard to teach a class of students about what has happened in the Global Financial Crisis.
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Class Crisis Finance Global Happen Hard Student Very
More financial instability will introduce more uncertainty all down the line.
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All Down Financial Instable Introduce Line More Uncertain
And we have never observed modern finance-capitalist systems operating over a sustained period at this kind of credit-to-GDP leverage ratio.
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Capitalist Credit Finance GDP Leverage Modern Observe Operate Period
Absent significant regulatory or tax changes, and a sharp transition could be disruptive.
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Absent Change Disruptive Regulatory Sharp Significant Transition
Furthermore, this pattern is seen across all the advanced economies, and isn’t just a feature of some special subset (e.g. the Anglo-Saxons).
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Across Advance Economic Pattern Special Subset
The basic aggregate measure of gearing or leverage is telling us that today’s advanced economies’ operating systems are more heavily dependent on private sector credit than anything we have ever seen before.
ALAN M. TAYLOR

Aggregate Credit Depend Economic Measure Private Sector System Tell Today
Then our economic future will be very different from our recent past.
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Different Economic Future Past Recent
Since then they have occurred more often, and 2008 was the most damaging of them all to date.
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Damage Date More Most Occur Since
A possibility is that we see more and more leverage, and credit-to-GDP ratios rise once more to even higher levels.
ALAN M. TAYLOR

Credit Higher Level Leverage More Possible Ratiom Gdp
Macroeconomic stability will be more elusive and that will affect all of our lives: from the risks many will face in childhood.
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Childhood Economic Effect Face Live Macro Our Risk Stable

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