ABSTRACT
The financial instruments were important precursors to the 2007 liquidity crisis and the following worldwide recession. Although the 2007 liquidity crisis was severe enough to set off the Great Recession, the Great Recession was not caused by any single internal or external event to the US Finance industry. Many scalability spirals were set in motion after the invention of derivatives in 1972, and the combination of them was sufficient to alter the institutional structure of Finance in the US, which resulted in the crisis and the Great Recession worldwide. Scale-free theories (SFTs) have already been introduced in Chapter 4 to explain the various kinds of connectivities, or couplings, among banks which set the scalability dynamics in motion. Another important concept is that of tiny initiating events. A key feature that sets SFTs apart from many social science theories is that they use a single cause to explain fractal dynamics at multiple levels.
