Read Storm, The for Free Online Page B

financiers. A generation of brilliant young graduates with advanced numeracy
     has been persuaded, by lavish incentives, to devote their intelligenceto financial inventiveness, rather than the more tedious and less lucrative alternatives of the laboratory or the classroom.
     There was a role, too, for the proles: smart young men with Estuary English, who could make a killing and accumulate previously
     unheard-of wealth on the dealing-floor.
    All those bonuses may have financed the champagne and cocaine markets, but they percolated through too to the Treasury and
     the wider economy. Governments were seduced by this narrative, and politicians brought up on Trotsky and
The Ragged-Trousered Philanthropists
fought for the honour to be champions of the City.
    There is now a brutal reappraisal taking place. Aspiring Dick Whittingtons are discovering that much of the gold was iron
     pyrites: ‘fool’s gold’. Brilliant financial innovators have been recognized as greedy or reckless or incompetent, or all three.
     Self-proclaimed, buccaneering entrepreneurs in the banking industry have been reduced to rattling a begging bowl and are dependent
     on the government bailing them out. Though the City remains an important industry, there are fewer illusions now that it has
     generated financial and wider economic instability, as well as wealth. As the financial sector stabilized in the middle of
     2009, top bankers’ confidence started to return and a debate started to emerge about whether a return to ‘business as usual’
     was either desirable or possible. It is clear that the radical reforms necessary to stabilize the banking system will be fiercely
     resisted in parts of the City.
    The impact of the simultaneous battering given to the ideal of owner-occupation and the reputation of financiers will only
     be fully understood with the passage of time, and much will depend on how much damage the storm has caused. The challenge
     for the UK will be to manage a very painful correction and to achieve some rebalancing, between private- and public-sector
     housing, and between the regulation and deregulation of financial services.
    What started as minor trouble on the Tyne has grown and turned into a major crisis for the UK economy. But the UK ismerely one, modest, part of the global economy: barely 2 per cent of it. The collapse of confidence in financial markets and
     in what were, until recently, seen as stable institutions is a much wider phenomenon. To that bigger context, I now turn.

2
The Great Credit Contraction
    For many Americans, hurricanes are a regular hazard. They happen frequently and are generally well prepared for. So it is
     with financial crises. In recent decades there have been episodes of extreme volatility in the prices of securities, property
     and commodities. There is usually a trail of damage, but it is temporary and superficial. But occasionally, as in nature,
     there is a financial super-storm of great destructive power. The biggest and most destructive within living memory (at least
     for the very old) was the Great Crash of 1929–32, which caused mass unemployment and a fall of one third in US GDP. It did
     not recover to 1929 levels for a decade. The experience shaped US policy, and politics, for a generation, perhaps two. Institutional
     memory of that event has been kept alive, not least by the Chairman of the Federal Reserve, Ben Bernanke, who studied it for
     his PhD thesis.
    The question that has dominated those charged with responsibility for policy has been whether the tropical storm proceeding
     through the global banking system was developing into a full-blown hurricane, or merely a violent storm like the savings and
     loans crisis of the 1980s. The latter resulted in cumulative losses of $500 billion, but was contained, albeit at a substantial
     cost to the US taxpayer, without affecting the economy of the USA in a significant way, let alone that of the world. Another
     potentially destructive