WE have never seen an economic crisis like this one. The cure, we think, is to take the standard medicine but in bigger doses.

--TNP ILLUSTRATION: TEOH YI CHIE

The risk is that no one knows if it will work.

A recession is defined as six months with no growth. We have been in one since July.

The US has been in one for twice as long, using its own peculiar definition. US economists say a recession is 'when it feels like one', and they say it has felt like one since December last year.

So that is when the US recession officially began.

My 13-year-old daughter asked me: 'Daddy, if we are in a recession, how come everything looks the same?

'People are working in their same jobs, at the same offices and living in the same flats. Why is there a recession if everything is the same?'

Good question. It happened because people stopped buying. True, the people and buildings didn't change, but the psychology did. Our confidence fizzled out.

When economies soar too high, they are likely to fall with a thud. It's called a 'hard landing'.

It started in the US when Wall Street wizards dreamed up new and creative ways to boost profits from a boring 10 per cent to a thrilling 50 per cent.

They did it with leverage. Just borrow 10, 20 or 30 times the amount invested to earn 10, 20 or 30 times more.

Fearless investors were easy to find. They bought structured products, hedge funds, private equity funds, collateralised debt obligations (CDO) and credit default swaps (CDS).

For the masses, there were 100 per cent home loans with interest payments deferred.

The sales pitch went like this: 'Don't worry about how the money is made. You wouldn't understand it anyway. Just sit back and enjoy the ride.'

Big companies got taken in too. Few understood that an A-rated CDO is much riskier than an A-rated bond. The underwriters and rating agencies had no incentive to explain it so, of course, they didn't.

DOC MONEY'S QUICK QUOTE:

'It's our lot in life. It's not a lot, but it's a life.'
- The queen ant's mother in the movie A Bug's Life, on being a small export-driven ant colony

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