It is now two years since the sky fell in on the world's financial markets. On Sunday, 14 September 2008 the US government came to a decision about the future of Lehman Brothers, refusing to bail out a troubled Wall Street investment bank that nobody was willing or able to buy.
The assumption of George Bush's administration was that there would be only minor knock-on effects from the bankruptcy. It was profoundly wrong, as events rapidly proved. On Monday, 15 September there was chaos on the world's financial markets. Fear that other banks were vulnerable meant that no institution was too big to fail. In the UK, pressure was particularly intense on Halifax Bank of Scotland and Royal Bank of Scotland. In the US, even Goldman Sachs was felt to be at risk. A month of mayhem ensued, only brought to an end by governments everywhere agreeing to stand behind their banks with almost incomprehensible amounts of taxpayers' money.
Never again
The crisis exposed the structural weaknesses of the bubble years and policymakers said what they always say at this point in the economic cycle: never again. Faced with evidence of the fragility of globalisation, they announced that the system required fundamental reform. At this juncture, it is appropriate to assess how they have been getting on.
There were four big economic shifts that helped cause the credit crunch and the recession that followed; from regulated to de-regulated markets; from manufacturing to finance; from west to east, and from labour to capital. There was also a deep cultural change, affecting Britain and the US in particular, which we will return to at the end.
http://www.guardian.co.uk/business/2010/sep/13/economics-recession-globalisation-rebalancing-reform