We all know what happened next. An unthinkably large and very black hole opened up beneath the global financial system. Like Wile-e Coyote, the banks didn't realise that they had been running in mid-air until the late summer of 2008.
Such was the magnitude of the problem and the interconnectedness of its constituent parts, that even the party representing the interests of the richest 1% under a cloak of populism and jubilant ignorance, had no choice but to step in and transfer much of the risk from the private to the state sector, from bankers to taxpayers (and bondholders, lest we forget) — or from capitalism to socialism, according to the Republican Party's kool-aid quaffers.
Socialism doesn't usually involve building levees around storm-threatened capital, but in the US the bail-outs were accompanied by a change of administration and a 'stimulus' package involving increased largesse from central purses...and that's like, socialism, right?
Anyway, this urge to borrow and spend yet more came about partly because the new guys at the helm had a long-standing commitment to bringing America's treatment of the sick up to civilised norms, brooded over long before the Crunch. That the inefficient structures being replaced actually cost more (and thus implied bigger government) than the full-coverage systems of 'socialised' medicine operated by several European countries, wasn't something that the ideologues wished to ponder much at this point.
Whether or not one is oddly predisposed to see the transfer of risk from the corporate sphere to the state and its system of public debt in strictly Marxist terms (Capitalism v Socialism), the truth is that the sickness itself is essentially unchanged: a cancer within the global credit market.
Stimulus in the States and austerity in the EU appeared for a while to have kept it in remission, but over the past fortnight or so we've been seeing how the Eurozone could become the weakest link in the ongoing therapy package.
Suddenly you had a single currency with multiple attitudes and responses to the sudden surge of government debt as a proportion of GDP. Some of the member countries were caught with their pants down. In fact the Irish had yanked their own trousers down with gay abandon in 2006, an uninhibited display of fiscal self-endangerment which tempted the likes of WPP to pack up and move to Dublin. (Even a canny number-cruncher like Sir Martin Sorrel was unable to ask the obvious question of this deal which looked too good to be true.) While the Greeks are by nature inclined to take a narrow bend on a mountain road at full speed, the Irish simply thought they'd chance it in order to make a few extra Euros.
Who's next in the line of dominos? Spanish banks appeared to have dodged the sub-prime bullet, but GDP in Spain had been overreaching itself, so when the local construction boom turned to bust, they got caught holding the gruesome negative equity baby anyway. They are also carrying considerable exposure to Portuguese debt and Portugal is on most people's list as European sovereign state 'Most Likely to Go Tits-up Next'. (Though some have their money on Belgium with its disfunctional political system.)
Furthermore, as a member of the Eurozone, Spain has limited defences against a concerted speculative attack. If the bond market considers it a default-risk, the cost of government borrowing (and in 2011 it will need to conduct a substantial new round) will soar which will make the upping of Spain's tits something of a self-fulfilling prophecy.
The question is, Is Spain TBTF? And what of France, where the political will to impose austerity is likely to waver in the face of the sort of social commotion they just adore over there.
The tumour is still there, largely in remission, and nobody really thinks that the patient (even if its just the European single currency we're talking about) can be allowed to die. But can it really be 'austerised' out of the European body politic, and hasn't this crisis revealed that the Euro has a genetic predisposition towards ailing from this kind of credit cancer?