Journal of International Affairs, Fall/Winter 2008
The financial deepening of economies has become one of the major dynamics characterizing advanced economies. The ratio of global financial assets to global gross domestic product (GDP) was nearly 350 percent in 2006, a ratio that jumps to 450 percent in a growing number of highly developed countries, from the United States to Japan. (1) More generally, the number of countries where financial assets exceed the value of their gross national product (GNP) more than doubled, from thirty-three in 1990 to seventy-two in 2006. Securitizing a broad range of types of debt is a key vehicle for this financial deepening. Government and corporate debt have been subjected to securitization for several decades, with varying degrees of success. The extension of securitization into consumer debt, including mortgages, took off in the 1980s in the United States. Thus mortgage securitizing is not new; indeed, the first mortgage-backed security was invented in 1977, although it was not necessarily widely used at the time.
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