The bail-out of Northern Rock raises the question: just how much of a crisis is this for the wider economy?
Certainly, at least three financial indicators point to a sharp slowdown in the UK economy. Swap spreads, the US yield curve (pdf) and the interbank-base rate spread have all had some predictive power for UK activity in the past, and all three point to falling manufacturing output in the next two years. Indeed, lower bank share prices themselves might be a portent of slower growth too.
However, recessions are a normal feature of capitalism, and possibly not a very damaging one (pdf). And we might not even get one. Company profits are generally very high. At worst, that should limit the cutbacks in jobs and capital spending. And at best it could keep the economy ticking over, and save us from this.
Instead, I suspect the biggest crisis might be an ideological one, not a material one - because the stories the more dogmatic defenders of free markets tell no longer seem so plausible, in three ways:
1. Capitalism is not as stable and self-sustaining as it seems. It needs the state to step in sometimes to protect it.
2. The big wages of some hedge fund managers and bank bosses are not a reward for great skill in judging risks, but are instead just luck; if you stand where money is flying around, some will stick to you. Indeed, what stands out from Hedge Fund Research's data is that, even before this year's troubles, many funds did worse than cash; as Pommygranate says, they're just fee machines.
3. The "stand on you own two feet" attitude is markedly absent. Everyone seems keen to blame someone else: ratings agencies, excessively cautious banks, freak events, whatever. Few are saying: "yup, I lost money; it's my own fault." The personal responsibility so beloved of rightist commentators when they write about sink estates seems lacking in the City too.