Winners and losers in the great deleveraging

Having predicted both the end of the debt binge and the unravelling of the toxic structured credit products it spawned, only one thing surprised me about the financial crisis of 2007 – how long the money-for-nothing junkies remained in denial. As the storm clouds gathered in July we were told it would be a one-quarter event. That soon became two quarters. We were then reassured that the problems were contained in such obscure backwaters as sub-prime, CDOs and SIVs.

But as the poison spread, it paralysed the entire banking system, precipitated an unparalleled loss of trust, $119 billion and counting of write-downs, tarnished reputations, tattered balance sheets, and multiple rescue rights issues that dare not speak their name. So much for the past. What does the future hold?

There is still a surprising ostrich-like mentality at large. The "one-quarter snafu" true believers of last summer now expect the Federal Reserve...