The current crisis reflects not the failure of capitalism, but the failure of the people running capitalism to understand how it works. This is bound to affect how we get out of the mess.

In simple terms, the prevailing consensus is to view the post-2007 crisis as the result of an external shock which could not have been anticipated. The remedy is to deal with the perceived cause (bankers or regulators) embarking on large-scale fiscal and monetary stimuli until the damaged “animal spirits” of households and business are restored. After this, things can get back to normal and stimuli be withdrawn.

In fact, the world's problems did not come from an external shock but were created within the various economies (in the jargon, they are endogenous not exogenous) and resulted from the failure of policymakers to understand the implications of the re-emergence of genuine capitalism, including large-scale private sector capital flows, which puts a premium on the relationship between the anticipated rates of return and the real rate of interest as the means of combining economic dynamism with overall stability.