In what follows, I focus on four elements that I believe you cannot remove counterfactually and still explain the crisis. These are the bare essentials that made it possible, and they all lie firmly in the private sector. They are—and we shall unpack them in plain English as we go—the structure of collateral deals in US repo markets, the structure of mortgage-backed derivatives and their role in repo transactions, the role played by correlation and tail risk in amplifying these problems, and the damage done by a set of economic ideas that blinded actors—both bankers and regulators—to the risks building up in the system. Again, I stress that these are quintessentially private-sector phenomena. I do this so that I can ask one more question as a setup. If all the trouble was generated in the private sector, why do so many people blame the state for the crisis and see cuts to state spending as the way out of a private-sector mess?

Mark Blyth, Austerity, loc. 76