Some banks loaned even more to have an excuse to securitize those loans.

High street banks got into a form of investment banking, buying, selling and trading risk.

banks even with large capital reserves ran out, so they had to turn to governments for bail out

In Europe, starting with Britain, a number of nations decided to nationalize, or part-nationalize, some failing banks to try and restore confidence

US Fed announcing another $800 billion stimulus package at the end of November.

360 banks that received Treasury bailout funds and found that almost all were using the money in ways other than to lend

The banking system virtually collapsed and the government had to borrow from the IMF and other neighbors to try and rescue the economy

Eurozone countries such as Portugal, Italy, Greece and Spain are also facing potential problems, while Iceland has gone through many in the past.

urged the US to provide meaningful assurances and bailout packages for the US economy

Asia was sufficiently decoupled from the Western financial systems

foreign investment in Asia

While the Western mainstream media has often hyped up a “threat” posed by a growing China, the World Bank’s chief economist (Lin Yifu, a well respected Chinese academic) notes “Relatively speaking, China is a country with scarce capital funds and it is hardly the time for us to export these funds and pour them into a country profuse with capital like the U.S.”

Many of these debts were incurred not just by irresponsible government borrowers (such as corrupt third world dictators, many of whom had come to power with Western backing and support), but irresponsible lending (also a moral hazard) from Western banks and institutions they heavily influenced, such as the IMF and World Bank

I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

prices fully and efficiently reflect all available information

Central bankers’ belief that controlling inflation was necessary and almost sufficient for growth and prosperity had never been based on sound economic theory.

World Bank admitted that developing countries have “come to the rescue” of the global economy, picking up the slack of the advanced economies which were hurt the worst by the financial crisis.

developing world is becoming the driver of the global economy. Led by emerging markets, developing countries now account for half of global growth and are leading the recovery in world trade

Bank believes the following factors help to explain this: Faster technological learning Larger middle-classes More South-South commercial integration High commodity prices, and Healthier balance sheets that will allow borrowing for infrastructure investment

To keep recession away, the Federal Reserve lowered the Federal funds rate 11 times - from 6.5% in May 2000 to 1.75% in December 2001 - creating a flood of liquidity in the economy.

prey in restless bankers - and even more restless borrowers who had no income, no job and no assets.

environment of easy credit and the upward spiral of home prices made investments in higher yielding subprime mortgages look like a new rush for gold.

Fed continued slashing interest rates, emboldened, perhaps, by continued low inflation despite lower interest rates

Fed lowered interest rates to 1%, the lowest rate in 45 years.

everything was selling at a huge discount and without any down payment.

the entire subprime mortgage market seemed to encourage those with a sweet tooth for have-it-now investments.

trouble started when the interest rates started rising and home ownership reached a saturation point

Federal funds rate had reached 5.25%

home prices started to fall

many subprime borrowers now could not withstand the higher interest rates and they started defaulting on their loans

financial firms and hedge funds owned more than $1 trillion in securities backed by these now-failing subprime mortgages - enough to start a global financial tsunami if more subprime borrowers started defaulting

could not solve the subprime crisis on its own and the problems spread beyond the United State's borders

interbank market froze completely

central banks and governments around the world had started coming together to prevent further financial catastrophe

Fed started slashing the discount rate as well as the funds rate

Federal funds rate and the discount rate were reduced to 1% and 1.75%

Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”

huge sum that went to bail out foreign private banks and corporations.”

forced banks to restrict executive pay and reduce the financial burdens on mortgage borrowers as a condition of its aid.

opened swap lines with foreign central banks, allowing them to temporarily trade their currencies for dollars to relieve pressures in their financial markets

 Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”

The central bank, in essence, pumped liquidity, the lifeblood of credit markets, into the circulatory system of an economy that was experiencing a potentially fatal heart attack.

“I think our actions prevented an even more disastrous outcome,” said Donald L. Kohn, who was the Fed’s vice chairman during the crisis. Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”

Fed should have forced banks to restrict executive pay and reduce the financial burdens on mortgage borrowers as a condition of its aid.

European Central Bank drew the most heavily on these currency arrangements, the records show, but nine other central banks also made use of them: Australia, Denmark, England, Japan, Mexico, Norway, South Korea, Sweden and Switzerland.