With unabashed glee, many commentators over the past week have again predicted the end of capitalism, some even suggesting a worldwide depression. It's the capitalist system that's at fault, they yell; none can find a single example anywhere in the world as a model.
The past few weeks have seen billions of dollars written off as many of the financial instruments in the US, and now elsewhere, have been caught out. Overstretched bad loans and reckless lending have been exposed due to the collapse of the US housing market.
Why will this not be like the Great Depression? The biggest difference is what policymakers have learned. The chairman of the US Federal Reserve, Ben Bernanke, did his economic thesis on the Great Depression. Maybe US$1 trillion has been spent to hold the system together. At the time of the Great Depression, there were few effective government-owned central banks and little global economic co-ordination. Indeed, international trade collapsed by 50 per cent in a few years as governments put up tariffs to try and insulate themselves, and indulged in a destructive cycle of competitive devaluations to vainly try to control global market share. This deepened and prolonged the Great Depression.
No nation is talking of jettisoning its obligations under the World Trade Organisation. Central banks everywhere have pumped more money - liquidity - into the system to avoid panic. As president Franklin Roosevelt said in the US' darkest economic times: 'All we have to fear is fear itself.' It is about confidence.
Roosevelt would have been impeached as a socialist for less than what the Bush administration has done. The latter is guilty of inactivity despite warnings that there was a fault line in the financial sector that has cracked. Out of this destructive chaos will come creative chaos, as new entities emerge to pick up good, low-cost, high-value assets.
It's cold comfort for thousands who are losing their homes and jobs. A recession is when your neighbour loses his job, a depression is when you lose yours.