The collapse of Lehman Brothers triggered one of the biggest corporate debt defaults in history, and also ignited the biggest stock market meltdown in decades. When the smoke had finally cleared, Lehman’s bonds attracted bids of 8-cents on the dollar, resulting in staggering losses of $365-billion. Worse yet, about 350 banks and investors were thought to have insured $400-billion of Lehman’s bonds through complex derivatives, known as credit default swaps (CDS’s), causing even deeper losses and mayhem in the markets. A fifth was wiped off London Footsie shares, and in Tokyo, the Nikkei-225 index lost 10% of its value in a single week.

The world’s wealthiest nations responded to the crisis, acting in solidarity, with a rescue package of $12-trillion, equal to a fifth of the entire world’s annual economic output. Stabilizing the financial system required capital injections pumped into banks in order to prevent them from collapse, soaking up toxic assets, guarantees over bank debt, and $5-trillion of liquidity support from central banks.

In order to finance the rescue operation, and prevent a second “Great Depression,” the G-20 issued an avalanched of debt, equal to 10% of their combined GDP in 2009, − the biggest since the Second World War. The IMF now calculates the G-20’s debt will reach 118% of GDP in 2014, up from about 80% before the crisis. Essentially, the British




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