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I enjoyed reading the blog and the paper. Certainly, recent events in the US lend some credence to the notion that there could be such a thing as too much finance (although most likely not in the case of most developing countries). However, even if we believe that the amount of finance needs to be limited, what really worries me is the mechanism the paper invokes to guarantee that in the end consumers could have access to the same goods as with a larger amount of finance. Essentially, all the adjustment has to happen through prices and in reality we know that in many situations prices are very sticky. Plus we observe in practice many countries where the the financial sector shrank considerably (take Argentina after the 2001-2002 crisis) and where dollar prices for houses (the example mentioned in the blog) went down only temporarily even though credit never recovered to the pre-crisis prices.