Yet, almost in the same breath, Rajan, professor of finance at the University of Chicago Booth School of Business, points out that even with the ghosts of the 2008 crisis lingering, banks are working to preserve their profitability, which includes the ability to take substantial risk while regulators are trying to limit exactly the same. “Do I trust the financial community to get it right? I hope so, but trusting them would be the triumph of hope over experience.”

Not all lessons have yet been learned from the 2008 breakdown as Rajan points out in Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton University Press, 2010). Key issues are rising inequality, trade imbalances and the clash of financial systems.

“Easy credit has been used as a palliative throughout history by governments that are unable to address the deeper anxieties of the middle class directly,” Rajan, a former chief economist with the International Monetary Fund, writes. A deep fault line was created in 2008, “when easy money pushed by a deep-pocketed government comes into contact with the profit motive of a sophisticated, competitive and amoral financial sector.”

The over-dependence on export of various nations is Rajan’s second fault line. “As long as countries like Germany and Japan are structurally inclined to export, global supply washes around the world looking for countries that have the weakest policies or the least discipline,” he writes. The latter are tempted to spend until they cannot afford it any longer.

The third fissure opens where seemingly transparent financial systems, such as in the United States or United Kingdom, interact with systems more reliant on close informal ties, such as in China, Japan or South Korea.

RAJAN HAS BEEN PRAISED as one of the few who saw the crisis coming, but he has also been roundly criticized for his book as well as for earlier remarks. Former Treasury Secretary Larry Summers suggested a paper Rajan presented at the 2005 Jackson Hole symposium was misguided.

In a post to his New York Times blog, Nobel Memorial Laureate and economist Paul Krugman called it “deeply depressing” to see Rajan argue that money spent by the US Congress to expand low-income housing and the inflow of foreign capital removed any discipline on home loans. “That’s a claim that has been refuted over and over again,” Krugman wrote.

Two years after the publication of Fault Lines, Rajan holds no grudge against his critics, yet his judgment on the financial community is still harsh. “Prior to 2008, the tenor was ‘Yes, we can see those problems, but the system has taken care of them before and can do so again.’ We were overconfident about the system’s abilities, when in fact we did not have the tools to deal with such a crisis.”

Disregarding the massive amount of leverage in the system, the financial community remained blissfully undisturbed, despite the magnitude of the looming disaster, Rajan observes. “Private bankers assumed they had things under control. The central bankers’ usual solution was to throw money at the problem to solve it, and they thought they could repeat that.”

WHILE THE OPTIMIST IN RAJAN is thankful for the attention that topics such as income inequality and global trade imbalances have received in the wake of the crisis, his more pessimistic side worries about a lack of action. “The central issues of reforming the nature of the financial systems, reducing export-dependency and improving education have not been addressed comprehensively enough,” he warns.

Rather, he sees patches of light and dark such as the Volcker Rule in the United States. If some entities are forbidden by law to pursue riskier activities, they will inevitably set up less regulated entities to conduct these activities, Rajan prophesizes. “So, what we get is a migration of activities from banks to non-banks. My concern is that large areas of the financial system are being overlooked in the post- 2008 reforms.”

A greater dose of skepticism on all sides might prove helpful in avoiding the next crisis. “In 2008, people took for granted that AAA meant AAA.” But make no mistake: “The nature of regulating the financial sector is so complex, we won’t know if we have taken the right steps until we do or do not face the next crisis.” And this is the realist talking.