According to one account the amount of dodgy debt held around the world is 940 billion dollars of which it was said that 40% is held by Eurozone banks.

These dodgy instruments had to originate somewhere. They were accepted in good faith by Institutions which presumably paid for them with clean money - a form of money laundering. Nobody is concerned, it seems, to ask where they came from.

The whole operation was facilitated by the credit rating agencies, on which banks normally rely. They unanimously gave to these instruments the same rating (AAA) that they give to the Bank of England or any other sound institution. To some extent the banks are victims although they fell for the lure of risk free profit which turned out to be a snare.

It seems that the operation originated in the US where the credit agencies are also located. US banks like Citigroup, Merryl Lynch, Bear Stearns, J.P. Morgan and some insurance companies have caught a severe cold and seem unlikely to have been involved. Somebody however has made a considerable killing and created chaos. Both may not have been accidental.

Coincidental or not, all this happened at a time when New York was losing to London its predominance in world financial markets.

It has to be said that banks and financial institutions have been lax in recent years not only in offering low interest rates, which borrowers must welcome, but also in the ratio of liabilities to earnings which they have been willing to countenance. They have also been willing to lend more than the inflated value of property offered as collateral, possibly in the belief that property values were in a permanent upward trend. So all the disastrous events of recent months have happened in an environment in which traditional prudence had been abandoned in favour of rather reckless risk taking. They have been brought to face reality with a jolt. Jack and Jill citizen are going to find it hard.

A large volume of credit was created as banks and financial institutions do. Unfortunately it was not secured, as has been banking practice, by adequate collateral and prudence in the acceptance of borrowers. It is not, however, a sufficient explanation of what has happened to blame the fall in house prices. That is a contributory factor. The real culprit is unsound business practice.

It seems that this vast volume of credit was created for people whose capacity to discharge their loans was in doubt at least, from which it might be deduced that the dominant factor was the volume of credit created rather than its security. It also seems that those who created the credit were quick to pass it on. This might suggest that it was created for the purpose.

There are important questions here needing an answer. Surely it is not only to me that the whole story smells.