When the economic tide began to turn in 2006, as US housing prices peaked, few expected more than a gentle slowdown. After a record-long worldwide expansion, policymakers were congratulating themselves on having tamed the business cycle. That “great moderation” now looks more like a grand illusion – or at least a more equivocal victory than once thought.

The length and strength of the boom were in no small part due to a complex financial system that multiplied the expansionary effect of gushing liquidity. When the slowdown eventually came, that financial system seized up. The downturn became an avalanche.