Renowned hedge funds are being closed down after losing billions. Specialized mortgage lenders are going into bankruptcy. Stock markets fall. Some of Wall Street's oldest banks are threatened with collapse. Central banks pump over EUR 200 billion of liquidity into the market - more than after 9/11. What is going on, why is it happening, and what does it mean for Romania?

To understand where we are today, we need to look at the past. It all started on the back of another crisis - the collapse of the Internet bubble - in 2001. At the time, in order to ease the pain of the collapse of one of the largest speculative bubbles in history, the US Fed rapidly dropped its interest rates, in effect unleashing huge waves of liquidity, thus creating a relatively "soft landing" for the US economy at the time. What this also did, is create a series of more traditional asset bubbles, including, this time, in US real estate. In effect, the current crisis is in reality a continuation of the unresolved Internet Bubble.

At a general level, this amount of liquidity (meaning low interest rates, cheap money), was so huge, and kept up for such a long time, that it has seriously skewed financial investors' perception of risk. Brazilian or Romanian state debt was priced at nearly the same level as German government debt. Anyone could issue high yield junk bonds for whatever they wished. As this pool of money spread itself across the globe, it distorted prices across asset classes and reduced people's awareness of risk. In Romania, the results of this can be seen in the billions of Euros that have been speculatively invested in the real estate sector, bank deposits, the capital markets and government debt.

At the same time, US consumers, the most profligate spenders on the planet, had for years, been gouging on imports, just as exports were declining, leadi