Things I Probably Will Have Time to Say
It could have turned out very differently.
It could have been that the money-center universal banks did understand their derivatives books. It could have been that, after the financial crisis, trust in financial intermediaries would rebuild itself quickly. It could have been that the North Atlantic's central banks would have been able to nail market expectations to a rapid return to normalcy, thus providing cash holders with powerful incentives to spend. It could even have been the case that fiscal expansion would have proven ineffective. It was Karl Smith who pointed out to me that in the guts of even the IS-LM model, fiscal policy expands
I+G private spending [satisfied, RJW?] by reducing the perceived average riskiness of and thus getting households to hold more. In the model it is guaranteed that a sovereign that issues more debt thereby necessarily reduces the perceived riskiness of average debt. In the world not. READ MOAR