The US Congress has refused to pass the $700bn bail-out plan for the time being. That may turn out to be appropriate. The issue at the moment is to provide liquidity to the market, particularly to failing financial insitutions. From the experience of Japan throughout the 1990’s, and also from the experience of Nordic countries, it is clear that the US financial crisis is going through a familiar sequence of events.

The problem is the US leadership does not seem to understand exactly what happened and what lessons to draw.