But I was shocked by how large a panic was produced by what seemed to me – and still does – relatively small losses (in terms of the size of the global economy) in subprime mortgages; by the weakness of risk controls at the major highly-leveraged banks; by how deep the decline in demand was; by how ineffective the market’s equilibrium-restoring forces have been at rebalancing labor-market supply and demand; and by how much core-country governments have been able to borrow to support demand without triggering any run-up in interest rates.