Learn from Asia. That is one lesson for western policymakers as a result of this crisis. Over the past decade, Asian governments learned the benefits of anti-inflationary policies from the west. Now, Asia can export to the west lessons on macro-prudential measures. These should become a vital ingredient of the policy toolkit worldwide.

As regulators rush to impose controls on financial institutions, it is easy to lose sight of simple but effective ways to ensure greater financial stability. This is helping propel macro-prudential measures to the top of the regulatory debate, and rightly so. These are targeted measures that help prevent bubbles and the build-up of financial imbalances. They work. My fear is western policymakers are not grasping fully the benefits of macro-prudential measures and instead are opting for second-best regulatory solutions that satisfy political clamour but are not effective.

During the boom under UK finance minister Nigel Lawson in the late 1980s, I advocated domestic credit controls for the UK. They could have worked then but were not implemented. Now, after the boom and bust under former UK prime minister Gordon Brown, the case is overwhelming for greater targeted controls. Yet, it is not just the UK that could benefit. Europe and the US could gain too.