Introduction

ALTHOUGH THE ECONOMIC SKIES ALREADY DARKENED IN 2007 EVEN THE most cheerful soul must have realized that something was wrong by the end of 2008 and that very difficult times lay ahead. After the burst of the real estate bubbles in the US and Britain in 2007 a meltdown of the international financial markets slowly took shape. Initially, banks and institutes highly involved in mortgage credits collapsed and had to be taken over by competitors. Consequently, the crisis spread to banks and insurance companies very rapidly. On 15 September 2008, investment bank Lehman Brothers filed for bankruptcy protection and the US government had to rescue banks and insurances companies in unparalleled ways. Within a few weeks a US bank rescue plan totaling US$ 700 billion was issued. By that time the US stock market had already realized a dazzling loss of more than US$ 8 trillion in about 15 months. Similar events happened in European countries with major financial institutions collapsing. States such as Ireland or Iceland almost went insolvent. All over the world millions of people lost their homes, jobs and life-long savings. By autumn 2008 it was clear that the world was experiencing the worst global financial and economic crises since the Great Depression. Only government intervention on a scale unthinkable until very recently could avoid a total collapse of the world economic system.

The unfolding catastrophe and the unparalleled extent of government interferences were, of course, extensively covered by the media. In the course of 2008 these messages became increasingly negative and pessimistic. Phrases such as “the current financial crisis is a historic event” (NRC Handelsblad), “this is going to be expensive for all of us” (The Independent), “the worst financial crisis since 1929” (Le Monde), “burnt-out Europe” (Les Echos), “shockwaves through America’s bank ing industry” (Copenhagen Post), “a game of publicly financed roulette” (El País), or “a brutal purge in the financial sector” (De Standaard) emphasized the seriousness of the downturn. However phrased, the common message was unambiguous: Europe stumbled rapidly into the deepest recession since the 1930s and the consequences would be unprecedented. Not only American house owners or holders of accounts at Icelandic banks would be affected, but future generations all over the world would have to bear the costs of exploding public debts.