Martin Wolf again described what was happening accurately:
The leverage machine is operating in reverse and, as it generated fictitious profits on the way up, so it takes those profits away on the way down. As unwinding continues, highly indebted consumers cut back, corporations retrench and unemployment soars.36
Hence the first moment of truth of August 2007, when some of the hedge funds controlled by banks discovered they could not pay their debts and banks stopped lending to each other out of fear they would not get their money back. Hence the failure of the hundreds of billions poured into national banking systems to prevent the second moment of truth in mid-September 2008 when the collapse of Lehman Brothers was followed within days by the threatened collapse of banks in nearly all the major Western states (AIG in the US, HBOS in Britain, Fortis in Belgium and the Netherlands, Hypo Real Estate in Germany, the three major Irish banks, the Icelandic banks). Hence the way in which in the two months that followed even banks which thought they had gained from the problems of their competitors were in dire trouble-Citibank (the world's biggest) and Bank of America in the US, Lloyds in Britain.
Hence, finally, it was clear the crisis was no longer just one of finance. The vast expansion of finance had created the illusion of a new "long upturn" in productive accumulation; the crisis of finance made that illusion disappear with traumatic effects. There was "a week of living perilously" in November as "panic seized the markets" .37 In the US Chrysler lost millions by the day, General Motors said it needed \$4 billion immediately to avoid bankruptcy and Ford joined in asking for a \$34 billion government handout. In Britain, Woolworths and MFI went bust. The toll of sackings in every sector began to compare with the haemorrhaging of jobs in the crisis of the early 1980s. And the pain was felt not merely on both sides of the Atlantic, but on both sides of the Pacific too.
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The New Age of Global Instability