Fool's gold - How securitisation promised much ... but delivered little

The notion that securitisation as a technique is able to increase liquidity in the financial system by making marketable securities out of hitherto illiquid debt has been exposed as flawed, argues Anastasia Nesvetailova. It's not that financial innovation is wrong per se; rather that securitisation has moved too far away from its basic function as an effective means of payment

"By now it was also evident that the investment trusts, once considered a buttress of the high plateau and a built-in defence against collapse, were really a profound source of weakness. The leverage, of which people only a fortnight earlier had spoken so knowledgeably and even affectionately, was now fully in reverse. With remarkable celerity it removed all of the value from the common stock of a trust."

Sound familiar? The American economic historian, JK Galbraith, wrote these words in 1955, in