The credit crunch is becoming a painful process of wealth destruction. It is a disease affecting the developed world, because it is there that leverage has been built up over the past two decades. Emerging markets, however, do not suffer from excessive leverage.

Dubai aside, there are no systemic banking crises in Latin America, Africa, the Middle East or developing Asia. In contrast, wealth destruction in the north will take some time. Full recovery after a banking crisis normally takes five years, and, historically, public debt rises 86% on average. The credit crunch is not over.