This whole mess is a bit of a chicken and egg problem. I would propose that it started with loose monetary policy starting after the dot-com meltdown in 2000. By 2003 there was a question as to where all the money was coming from. The standard answer was excess savings in the rest of the world piling into America; proof - the balance of payments deficit. In retrospect it was probably more a question of loose Fed monetary policy.

In the low interest rate environment there were winners and losers. Borrowers were and remain winners with generationally low interest rates for up to 30 years. If you were prudent. Holders of cash were losers with generationally low interest rates payable on their investments.

At some point, 2004-5 maybe, somebody figured a way to mass produce products that could be sold as equivalent to cash, but yielding more than cash accounts. Doubt at this point anybody will stand up and say, "Yeah, I invented Collateralized Debt Obligations and found a way to get them rated AAA." This unknown genius then found a ready market among young finance MBAs who were responsible for placing cash.

With all that cash washing around the world financial markets this looked like a no-lose proposition. Basically however much could be packaged could be sold. Astonishing the investors around the world who have taken losses on the stuff.

But wasn't it obvious all would end in tears? There's blame enough for everyone, of course.