The world is now in the grip of a first-class financial crisis. Some will be hit harder than others, but no one is going to escape. Final confirmation of this has arrived with the news that the two giant mortgage companies, Fannie Mae and Freddie Mac, pillars of American life that underwrite, or insure, most home-loan lending throughout the United States, are in serious trouble with their share values halving.

Meanwhile, stock markets are collapsing almost everywhere, and in both Europe and America business profits are shriveling and employment layoffs are beginning. Pinning down a single reason for this reversal of global fortunes is hard because the problems seem to coming from every angle — soaring oil prices, energy shortages, world inflation, currency volatility, environmental disasters, huge policy errors, terrorism and inept diplomacy leading to rising tensions between the major world powers.

But if there is one causal phenomenon that could be said to be behind all these growing troubles, it is the past decade or so of irresponsible lending, easy credit and mountainous debts in which the main Western economies have become trapped, thanks to lax financial regulation and unrestrained financial-sector greed.