Has Financial Development Made the World Riskier?

[farnamstreet]

Raghuram G. Rajan, former Economic Counselor and Director of Research at the International Monetary Fund, wrote a fascinating paper: "Has Financial Development Made the World Riskier?" Ultimately, he concludes, the incentives of bankers and their willingness to seek out and take tail risks brought the system down.

 

I think most investors-even most laypersons-would benefit significantly from reading and thinking about this paper.  

 

You can find a summary of the paper here.

You can find the full PDF paper here.

If you like the paper, he wrote an expanded edition here.