What ever happened to all the grandiose plans for improving the global financial architecture? Up until a few years back, leading policy economists seemed to be tripping over themselves to come up with blueprints for radical change. Particularly popular were plans for new global institutions, including a financial regulator, a sovereign bankruptcy court, an international deposit insurance corporation, and even a global central bank. More modest plans (such as mine) merely called for a sweeping restructuring of the major existing multilateral financial institutions, the International Monetary Fund and the World Bank.

Over the past couple of years, however, all introspection appears to have vanished. Instead, the policy community has developed a smug belief that enhanced macroeconomic stability at the national level combined with continuing financial innovation at the international level have obviated any need to tinker with the system. Never mind that cross-border asset holdings have exploded to roughly $60,000bn (£30,500bn) (or about 120 per cent of global gross domestic product). There is no problem that markets cannot solve.