Was there a crash, and nobody noticed?

Was the so-called credit crunch more than just another fleeting economic alarm?

On 9 August, all the big international banks simply stopped lending to each other, as jitters over the enormous extent of bad debts riddling world financial markets suddenly turned to tremors. It was unprecedented. It was like a run on the banks – but by other banks.

Now, three months later, people are asking if anything happened. Some say there's nothing to worry about. But others are speculating that a landslide might have been triggered – one to match the worst economic collapses of any time in the past 100 years.

It seems that the facts are still hidden from public gaze.

To understand what is happening, one has to realise how much has changed inside the marble halls of high finance. Subprime mortgages are merely a symptom of a shift far more fundamental.

Putting it simply, the first seismic shift is that credit – other people's debts – has become an asset which can be traded. The second is that trading in general has become wildly leveraged or geared. That is, most professional investing is now done with borrowed money or IOUs. ...

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