Martin Wolf has a fascinating essay on how the “mixture of crony capitalism and gross incompetence” in the Anglo-Saxon Model of capitalism (Basically the sort of high finance practiced in the US and the UK, is headed for a fall.

His points:

• The whole cronyism, corruption, and incompetence thing.
• That the current model of securitized lending is may not be valid. The models and instruments are incomprehensible, even to the experts.
• The failure of the central banks to provide meaningful regulation.
• The spectacle of Hank Paulson, US Treasury secretary, trying to organise a cartel of holders of toxic securitised assets in the “superSIV”, when 15 years ago, all it handed out to Japan was lectures on letting asset prices find their level.
• That the US consumer is increasingly no longer considered a investing safe haven.
• That the US consumer is finally tapped out.

I agree with him that these presage long term changes in the financial markets:

Experience teaches that big financial shocks affect patterns of lending and spending across the world. Originating, as it does, at the core of the world economy, this one will do so, too. The question is how stable and dynamic the world economy that emerges will be.

Go to his article to see the graphs.