This chapter provides a synopsis of the crisis, looking first at the buildup of financial problems, then at the subsequent meltdown and finally at interventions by the governments and central banks of the world's major economies to confront the crisis. This is not a chronological account. That task is left to chapters 7, 8, 9 and 10. What this chapter does is to assess the risk exposures that built up during the credit boom and show how government and central banks have moved to accept much of what was previously private-sector risk.

The several stages of the crisis

This crisis has emerged not suddenly, but in several stages, each stage not only unexpected but also at the same time more serious and more damaging than the stage before. At first things did not seem so bad. In August 2008 one of the best informed policymakers in the world expressed his surprise that the crisis has been so long-lasting and deepseated. Charles Bean, deputy governor of the Bank of England, said in a radio interview from the Jackson Hole central bank governor's conference,

Last year most of us thought this was a financial crisis that with a bit of luck would be over as we got the other side of Christmas, but it has dragged on for a year and looks like as if it will drag on for some considerable time further yet.