"Fingers crossed this was the big one," I wrote during that terrible week in September 2008.

"The tremors have been coming regularly for a year. But this may be the jolt that goes down in history. The one that joins the Wall St canon of disasters: October 1929, October 1987, September 2008."

I was more or less right.


As we approach the 10-year anniversary of the collapse of Lehman Brothers bank on September 15, 2008, it is being remembered as the peak of the global financial crisis.

With more than US$600 billion in assets, it was the biggest bankruptcy in history. It still is.

After the US Government refused to bail out the 160-year-old bank, all bets were off. No one was sure the crisis could be contained. The system teetered on the brink.

New Zealand markets were the first to open after the bankruptcy was declared – they plunged.

It was the day we all realised the market meltdown – soon to be prosaically dubbed the global financial crisis (GFC) – was going to be a bigger deal than 1987.

Was it going to be as big as 1929? Would we face another Great Depression? Who knew?

Any journalistic bias towards ever more interesting and unusual events went out the window.

I was less than three years into a 30-year mortgage and living pay cheque to pay cheque. I had just had my second child.

Suddenly the issues I was writing about seemed dangerously real.

Thankfully, as we saw later that week when the US Government did move to bail out insurance giant AIG, some things were still considered too big to fail.

The world's central banks sprang into crisis mode and a tsunami of liquidity – money printing and ultra-low interest rates - were unleashed to save the system.

There were plenty more harrowing days left in the GFC but the panic and fear of a financial armageddon subsided.

About what came next – the economic fall-out and long-term consequences for the financial system – I was only partially right.

"Through the past year the awareness that there was something rotten in the system has been tempered with hope that the normal service can still resume," I wrote.

"That much changed this week. Normal service will not resume. A line has been crossed and the rules of the game will now be changed."

Well, 10 years after Lehman, normal service has not resumed.

Central banks are still printing cash, although they have begun winding it down. In the US (although not yet in Europe) interest rates are finally starting to rise towards something approaching a historical norm.

But while the pinstriped suits and ostentatious excesses of the banking world went quickly out of fashion, markets carried on.

The patch-up job done by central banks held firm enough to allow governments to avoid any radical structural change to the system.

Regulations were tightened but the financial world kept turning.

In fact, the cure for the crisis created great opportunity for those with access to capital.

Low interest rates drove booming equity and property markets.

Social inequalities widened in many countries as housing costs soared while wages stayed flat.

The profits, as they say, were privatised and the losses were socialised.

The public – especially in the United States and United Kingdom – simply would not accept that prescription.

Faith in a progressive, globalised world view – a view that had been championed by the political establishment on both the left and right – crumbled.

A receptive audience was created for cynical politicians seeking to blame immigration and liberal social values for the world's ills.

Momentum was handed to nationalists, who played up their status as challengers and underdogs to shake the world's political foundations in 2016.

First with Brexit in the UK, then the election of Donald Trump in the US, the game really did change.

In New Zealand we've seen less political turmoil. In part because we avoided the world of the direct effects the Australian banks held.

The localised quirks of the finance company collapse aside, we quickly recovered from recession and were dubbed, for a time, the rock star economy.

But we have felt the shockwaves.

I'm not the first commentator to draw a link between the collapse of Lehman and the crumbling of faith in a progressive, liberal world view. I doubt I'll be the last, because we simply haven't yet seen this political story play out.

Will this reactionary backlash be a short-term aberration or something deeper that outlasts the personalities currently championing it?

Liberalism and globalisation bounced back from the far greater challenge of post-Depression fascism in the 1930s – but not without a terrible toll.

The social legacy of Lehman Brothers and GFC has changed the world in ways we are only starting to understand 10 years on.

We didn't get a Great Depression and a world war. But we did get a great recession a nationalist backlash – an era of public anger and division.

That's the real price we've paid for the greed and excess of the banking system through the first decade of this century.