Volume 44, Number 174,
July-September 2013
The Decline of the United States:
Global Historical Context
Alejandro Dabat and Paulo Leal
THE US FINANCIAL SYSTEM AND ITS ROLE IN THE CURRENT CRISIS ( ...continuation )

At the same time, this led to the gradual replacement of genuine credit for productive activities by speculative investment and massive leveraging of this, or a very peculiar type of “socialization” of private risk (Stiglitz, 2010; Roubini and Mihm, 2010), which encouraged criminal behavior.15

Table 1 shows important details regarding the financial structure of major regions and countries, demonstrating the primacy of the United States in financial deepening and the securitization of credit, far above Western Europe (except Great Britain) and especially China, whose relatively low level of deepening through credit (including stock market) matches its low securitization. This can be explained by the widespread predominance of a public financial system where traditional banking credit for public property and the securitization of equally public instruments dominate (Anguiano and Rodríguez, 2011).


The development of the recent path to speculation in the US and the consequent results cannot be understood without exploring the nature and dynamics of this financial system. This includes studying the relationships among: a) the .com bubble at the end of the century and the 2001-2002 crisis, as well as the specific conditions that led to its end (The Economist, 2007),16 b) the large real estate bubble of 2002-2006 and how it came about and c) the broader, more widespread and deeper bubble of packaged derivative instruments in 2006-2007, which “contaminated” the financial markets and company assets of all types with irrecoverable debt.

Despite this centrality, the nature of the new financial system is not enough to explain the underlying causes of the US crisis or its historical decline from a global superpower country. For a better understanding, we must look to deeper national and international issues.

15 According to footnote 11 on the “3Ds,” decriminalizing financial operations allowed for massive fraud (with vendor knowledge), of irrecoverable assets such as cdos backed by ratings agencies. Pursuant to the most accepted doctrine of international criminal law, fraud is considered any transactions that causes material damage to third parties with the purpose of profit or deceit, which was plainly present in the behavior of the major financial agents that set off the US crisis, as is clearly documented in works cited and in abundant literary and cinematographic testimony.

16 During the 2001-2002 crisis, the major reduction in interest rates to below inflation, a move taken by the US Fed to jumpstart the economy, reoriented speculative stock market funds to the real estate market, taking advantage of historically low interest rates in comparison to rates for other assets. Marshall (2009) believes that this was the result of a governmental strategy to “direct speculative capital to real estate through fiscal and tax incentives, as well as financial innovation to extend mortgage credit to new agents in new ways.”

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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