When the financial history of 2008 is written, someone will record how many times the heads of the big financial firms, and those in charge at regulatory and government bodies, said that the worst is over -- only for the situation to get worse.
Last Friday, the stock markets were celebrating the ban on short selling and Henry Paulson's $700 billion bail-out plan.
On Friday, there was uncertainty as the bail-out plan fell apart amidst mounting criticism, even as the US suffered the biggest bank failure in its history (that of Washington Mutual).
How much more bad news is to come?
Lots, it would seem.
Informed opinion in India has it, for instance, that those at the centre of the financial world knew a long time back that this was going to develop into a massive crisis, and deliberately underplayed the problem at every stage in the hope of keeping a lid on the issue.
So far, the crisis is confined to the US, and one danger (it is said) is that it could spread to Europe.
Indeed, it turns out European banks escaped by a whisker just a week ago, when AIG got nationalised.
Had AIG failed, its $300 billion credit insurance to European banks would have been of questionable value, leaving them with the re-capitalisation problem that, in the end, consumed New York's investment banks.
The amazing thing is that most European banks seem to have leveraged their capital even more than New York's former investment banks. Deutsche Bank's leverage, for instance, is said to be 50:1 (Morgan Stanley's was "only" 30:1).
This has given birth to a new concept. As a parallel to the familiar idea of a financial firm being 'too big to fail' (which, therefore, has to be bailed out by the government), now we have banks that are 'too big to save' -- in other words, even governments may not be able to save them. Deutsche Bank, as an excellent Financial Times article spells out, has liabilities that are equal to 80 per cent of Germany's GDP, and Barclays Bank's liabilities are actually the size of UK's GDP.
The risk is that all this rides on balance sheets with precious little shareholder capital.
If the unthinkable happens, and markets were to up-end otherwise solid banks, who will have the financial power to do a bail-out? Not, it would seem, the governments of the UK and Germany.
The risk, therefore, is not just to an institution but a whole economy.
In the US, meanwhile, the financial firms' debt jumped from 21 per cent of GDP in 1980 to an incredible 116 per cent in 2007 -- data pulled out by Martin Wolf of the FT.
From being the smallest component among the major categories of debt in the country, this became by far the biggest, and can only be described as a consequence of financial capitalism having run amok.
Instead of finance serving the rest of the economy, the tail began wagging the dog -- aided by theories about markets always being right, about financial innovation yielding productivity gains and therefore generating growth.
The people who advocated such a system were, of course, its biggest beneficiaries. Bloomberg reports that the five investment banks which have been swallowed up by this crisis paid their top executives $3.1 billion (yes, billion) in 2003-07.
Half their incomes went into employee salaries and bonuses. Even after that, the financial sector accounted for 40 per cent of all corporate profits in the US.
You can understand why, across the US, there is anger at the unfairness of a Wall Street bail-out when little has been done to help distressed homeowners and troubled manufacturing companies.
