Quote of the day

"...the financial system is a subsidiary of the state."

Who's spouting this dangerous socialist nonsense? None other than the FT's Martin Wolf. I see what he means, but he didn't phrase it quite like that when he was writing Why Globalization Works, did he?

Anyway, now that I've taken my cheap shot, it's worth reading the whole article. This particularly struck me:

All these crises are different. But many have shared common features. They begin with capital inflows from foreigners seduced by tales of an economic El Dorado. This generates low real interest rates and a widening current account deficit. Domestic borrowing and spending surge, particularly investment in property. Asset prices soar, borrowing increases and the capital inflow grows. Finally, the bubble bursts, capital floods out and the banking system, burdened with mountains of bad debt, implodes.

This sounds eerily like Joseph Stiglitz describing the South-East Asian financial crisis ten years ago, but we're talking about the United States right here, right now. Obviously the US isn't going to be headed cap-in-hand to the IMF asking for a bail-out (they have China and Japan for that), but it still rather brings home the way the mighty are fallen.