"Let's just recap on how we arrived at this juncture. Globalisation has led to the development of two groups of countries – those running big trade surpluses and those running big trade deficits. Germany and Japan provided the machines and high-grade capital goods that allowed China to become the source of low-cost manufactured goods. Countries where the industrial sectors had been hollowed out over the decades – such as the United States and Britain – were ready buyers for cheap imports. Inflation fell, allowing interest rates to fall.
But manufacturing was not the only sector to be globalised. Banks became bigger and bigger, expanding their business across frontiers to the extent that national regulators found it harder to supervise them properly. With low inflation making traditionally safe investments less attractive, there was a global search for yield. As we now know, this led to speculative money flooding into places such as Iceland and into complex derivative products that nobody really understood. The banks became so big and had so many different functions that it was beyond the capacity of any chief executive – no matter how brilliant – to manage them properly."
Larry Elliott in the Guardian