How a local squall might become a global tempest

By Niall Ferguson

The phrase “perfect storm” has been trotted out once too often to characterise the past year’s financial crisis. Yet the real perfect storm may still lie ahead.

Fans of the George Clooney film will recall that the perfect storm was caused by the convergence of a hurricane off the Atlantic seaboard, an area of low pressure south of Nova Scotia and a cold front swooping down from Canada. Result: howling winds, vast waves and the loss of at least one boatload of Gloucester fishermen.

One year after the onset of the financial crisis we are still calling the “credit crunch”, could we be witnessing a similar catastrophic convergence, as the slow-moving hurricane of a US banking crisis hits first a commodity price rise and then a global slowdown?

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