Bank for International Settlements annual report World economy may be at "tipping point"

The report insisted that the subprime crisis in the United States was only the trigger for the financial crisis, not its ultimate cause. It also took issue with the what is different school of thought, which has sought an explanation for the crisis in the extension of the originate-to-distribute model of bankingin which debts are bundled and then sold offto the housing market. While such an analysis contained some important insights, it was also important to focus on what is the same. Adherents of this school would note the parallels between the current period of economic turmoil and earlier ones.

Historians would recall the long recession beginning in 1873, the global downturn that began in the late 1920s, and the Japanese and Asian crises of the early and late 1990s, respectively. In each episode, a long period of strong credit growth coincided with an increasingly euphoric upturn in both the real economy and financial markets, followed by an unexpected crisis and extended downturn. In virtually every instance, some form of new economic discovery or new financial development provided a further new era justification for rapid credit expansion, and predictably became a focus for blame in the downturn.