Massive deregulation in the United States allowed non-banks to function like banks, exposing the institutional fragility particular to banking. This unprecedented scale of deregulation and the concomitant absence of systemic risk controls were facilitated by a radically lopsided political economy in the North. This was, in turn, held up by an extremely lopsided global division of labour. Export-surplus-fuelled liquidity and excessive deregulation combined to exacerbate the cyclical nature of banking systems that follow from the credit nature of money, leading to massive booms and searing busts. Layer upon unstable layer, these interacting dynamics have imperilled our world system and brought us to the brink. Each dynamic will now have to be rebalanced, a difficult political task.
