The authors argue that the current financial crisis is a result of the radical financial deregulation process that began in the late 1970s. This evolution has taken the form of cycles in which deregulation accompanied by rapid financial innovation stimulates powerful financial booms that end in crises. Governments respond to crises with bailouts that allow new expansions to begin. As a result, financial markets have become ever large and financial crises have become more threatening to society, which forces governments to enact ever larger bailouts.

In this paper the authors have analyzed a series of structural flaws in the current financial system that helped bring on the current crisis, and then proposed a nine point regulation policy designed to end this destructive dynamic.
 
October 22, 2008.

This paper was originally published as a working paper, Working Paper Series, No: 181, Political Economy Research institute (PERI), University of Massachusetts.