Everybody now knows the narrative of the Great Financial Recession of 2008, in particular, the impact that toxic derivatives had in terms of exacerbating the crisis.  And the usual defense of those who misdiagnosed the crisis is that the very nature of the so-called “shadow banking system” made it difficult to determine the systemic nature of the crisis and the corresponding extent of the banks’ liabilities.

In fact, that is a lame rationalization, as Jan Kregel notes in this interview. Kregel correctly points out that we’ve seen this show before in Asia during the financial crisis of 1997-98.