The Way of All Debt

By John Gray

Payback: Debt and the Shadow Side of Wealth

by Margaret Atwood

Toronto: House of Anansi, 230 pp., $15.95 (paper)

A perturbation arising from the American market in subprime mortgages has spread through the banking system to disrupt economic activity throughout the world. The pattern of cause and effect will be debated for many years, with historians asking when and how the global economy was set on the path that led to its current condition. Already there are some who trace the crisis to decisions of Alan Greenspan, chairman of the board of governors of the Federal Reserve from 1987 to 2006, when he responded to events such as the collapse in the late 1990s of a hedge fund, Long Term Capital Management, and the subsequent bursting of the dot-com bubble by creating a climate of easy borrowing, which in turn inflated another bubble in the housing market.

Others suggest that a change in the legal system of banking brought about by the repeal in 1999 of the Glass-Steagall Act of 1933, which had aimed to limit speculation by separating commercial and investment banking, created an environment that allowed reckless lending. Yet others explain the turmoil in world markets as a symptom of an endemic instability in the type of finance capitalism that has developed in America, Britain, and some other Western countries.