There are three types of people, optimists, realists and pessimists. Being an optimist puts you amongst the likes of Rumsfeld, Bush and a captain of the MCC touring Australia. Unfortunately reality ends up biting you on the behind. Mac and Mae being Insolvent to the tune of $2 Trillion is that bite.

Stephen , Tamworth, Australia

Some call it securitisation others call it usury. It is making a gain by borrowing and lending. Is that a moral way to make a living? Islam doesn't think so. Maybe they are right this time.

David Nammory, Liverpool,

Anatole - you're at it again! Please take off and throw away the rose tinted glasses you wear. Once unemployment starts to really get going, and ordinary people start defaulting on mortgages, the sub-prime episode will seem like a sideshow.

MikeRight, london, uk

The bankers took more than their fair share of the low interest rates that stable non-inflationary growth enabled.

It is the inter-bank margins that are being squeezed out.

The city of london and its supporting cast of lawyers and accountants need to be exposed to a sectoral recession.

Richard Boyce, Haywards Heath, UK

Sounds a lot like the LMX spiral that hit the reinsurance market 15+ years ago after Piper Alpha, Lockerbie etc. all over again...Look how long it took Lloyd's to recover from that. The FSA et al should have picked up on this. Once again the so called experts fail to learn from history!

Rick, Surrey,

The banking system created financial instruments to produce huge paper profits through gearing using other people's money. It lost connection with reality and was a game like pass the parcel. Only the music stopped. Tighter regulation is the answer to get the banks back to their original function.

peterfieldman, paris, france

How does a company continue to operate if it has $5 trillion debt?

Phil, Reading,

"...the main people suffering pay cuts and job losses in the present crisis are bankers, rather than industrial workers as in previous slowdowns".

This might be because there are virtually no industrial workers left in the USA or the UK. All those jobs have "gone East".

Tom Welsh, Basingstoke,

Anatole, the so-called real economy is built largely on credit withdrawn from inflated property - last year at £50bn per anum. Without this the consumer will have to suffer and our public services drastically cut, including removal of generous pension benefits.

Steve Marchant, Newton Abbot, UK

The squeeze - exemplified by the concertina is just about the best analogy of the true happenings of late. Everyone in the series takes a cut, pays a bonus to produce - exactly nothing. Now we pay for all that smoke, all those mirrors, and pay we will - us at the bottom of this reckless pyramid.

Tom Taylor-Duxbury, Ludlow, UK

You just do that David L, Chipping Norton.

We need people like you to keep on taking the losses otherwise the rest of us will have to.

Alex, Salisbury, UK

"Neither a borrower, nor a lender be" - a William Shakespeare quote that may seem rather extreme, but frankly, the banks did go over the top with their limitless speculation based on immeasurable greed. Now that someone's pulled the chain, let all that is bad be washed away for a new, clean start.

Peter, Geneva, Switzerland

Man-child Anatole Kaletsky still refuses to grow up. Your analysis is only that of what has been made transparent Even you cannot look through the opaqueness of a banks balancesheet if they hide it.

Glynn , Kingston,

The "worst" has not come with regard to the home mortgage fiasco. Many more of the subprime loans will not adjust until spring of 2009.

I must ponder: Is it due to inflation that segments of the economy appear to be growing? I spend more for less.

P.S. The U.S. is insolvent.

Jennifer, Granbury, TX/USA

"...the main people suffering pay cuts and job losses in the present crisis are bankers, rather than industrial workers as in previous slowdowns." As a person running a business I find this statement really strange. Industry is really feeling the pinch. The only savings we can make is cut staff soon

Al, Oxford,

It seems to me that whatever forces are currently coming into play, some balance on the 'fear - greed' continuum is being restored.

David F George, Ubatuba, Brazil

The USA and UK governments have a limit on how many Banks and how much taxpayers money can be generated to continue the rescue of Banks. I see big cuts in government spending, it is inevitable, the priority must be to save the financial institutions..

Geoff Berry, Bolton,, UK.

it seems to me that the savers loose out worse. we have our money deposited in the bank, the bank needs that money to lend to the house buyers. at high rates of interest, but keep the savers interest rates low claiming to keep inflation down, while the saver takes the risk of the bank going broke

gordon, plancoet, france

As Gordon Gecko once said, "Most fund managers are sheep and sheep get slaughtered". The best financial managers will still continue to make money, the rest probably weren't good enough in the first place. Bring in the cleavers.

David Lea-Smith, Edinburgh, U.K.

Excellent. Long experience tells me that when the financial pundits predict that `this is it - it's the big one, etc etc' we are coming out of it.

Fill your boots now chaps!

David L, Chipping Norton, UK

But a financial crisis can easily become an economic crisis. (Banks have no money to lend, & increase prices to make profits etc.)

We are all dependant upon the central banks, regulators & govts & how they react in this situation. Banks must be forced to declare their true losses & recapitalise.

Alistair Nicholls, Manchester, UK

The Credit Multiplier is economics 101 and the fact that it works almost as well going backwards is something that people and businesses - including banks - easily forget. They consequently borrow to the hilt and then complain when the consequences bite.

Duncan McGregor, Melbourne, Australia

I think you are forgetting that the banks use the fractional reserve system. The 100k loan is multiplied x9.A bank is only required to have 10% of its balance sheet liquid. The mess can not be "unwound" back to 100k because the bank has lent the "new" 900k based on the orginal loan.

albsure, london,

I suspect John Livesey is only partially correct. Yes, securitization does spread risk - but if you can't identify who is at risk, and the extent of the risk they're exposed to, - or would like to pass on to you - its small wonder that the financial system seizes up.

Rogerccanada, Kamloops, Canada

But Anatole, first you deny there is a crisis, and now you say its just a small one? The outlook for "post industrialisation" economies which follow the debt fuelled consumption model you frequently espouse is grim - you still havent grasped that the UK economy runs on cheap credit, which is gone.

rick, melbourne,

The other problem with this simplistic analysis is that the failure of the intermediary institutions mentioned would not only hurt financial workers. If Citigroup failed its depositors lose money (if not bailed out by the overstretched Fed), which means 'the man in the street' losing his savings.

Laurence Davison, Sydney, Australia

The other piece of paper that you forgot to mention that has once again been proven worthless .... the economists qualifications.

Garth, Australia,

The last 6 paragraphs are simply the best most understandable precis of how we are, where we are, I have read in any publication.

Now, how do we report the perpetrators to Equifax?

Mmmmm thought not......

Steve, London,

You are forgetting something. When people got their mortgages from the local Bank, that Bank took all the risk. And in that "Golden Age" that everyone now remembers, 500 Banks failed in the US in the eighties alone.

Securitization has its problems, but one of its virtues is to spread risk.

jon livesey, Sunnyvale, CA/USA