Lehman horrors are fading fast as major economies begin to recover

It appears memories of the fateful events of 12 months ago have faded fast. Consumer confidence is improving, some major economies have started to recover, and some banks are paying big bonuses again. It is as if we have awoken after a bad dream.

But investors’ relief that financial collapse has been averted, manifested in rising equity markets over the last five months, is likely to fade, to be supplanted by the realisation that the world economy still faces a number of challenges. Chief among these is the Western consumer is still overburdened with debt, and thus likely to remain at home. Asia’s situation, however, is more promising. Its big battle was its financial crisis of 1997. In the aftermath, the region built up strong defences that have provided it with resilience during the last two years. Banks became prudent, buildin...