The great liquidity illusion ... and how regulators can make sure it never happens again

Neil Kinnock, former leader of the UK's Labour Party, once advised his colleagues: "If you find yourself in a hole, stop digging." Although he was speaking about party politics, his words could not be more appropriate in the midst of the current financial crisis.

The global financial system has dug itself into a hole; and if left to its own devices, it will continue digging unless stopped.

Faced with the tangible danger of a global financial recession and even depression, the world's finance minis