The world is running out of money. If money is credit, and credit relies on confidence, there is not enough confidence in the financial system to supply the world with the money it needs. Since the initial credit crisis struck in 2008, credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow. The world’s central banks are playing a rear guard action by acting as lender of last resort to banks that no longer trust each other and have stopped lending in the interbank market. As liquidity flows out from the system, the rottenness that has corrupted the foundations of global finance is now exposed for all to see.

This was especially evident in the bankruptcy of MF Global, when the unthinkable happened – innocent bystanders on the Chicago Mercantile Exchange were stuck with over $1.0 billion in losses that should otherwise have been allocated to MF Global’s lenders. For over 100 years the futures exchanges have bragged that no customer on an exchange has lost money due to a broker-dealer’s default. No longer. This is how confidence is lost in the financial system – investors are surprised by large losses from institutions or products thought to be impregnable.