The globalisation of finance should have brought substantial benefits. In practice it brought a series of devastating currency and banking crises in the 1980 and 1990s, particularly in the developing world. The failure of advanced countries and of the IMF to rescue the damaged economies of Asia, Russia or Brazil taught those countries, and the emerging Chinese giant, an overwhelming lesson: never again. Emerging economies ceased importing capital, but by keeping their exchange rates down, running huge current account surpluses, recycling capital inflows and accumulating enormous foreign currency reserves, they began to export it on a vast scale. Since several advanced countries also ran large current account surpluses, to which the oil exporters added their own massive contributions, the US emerged as the spender and borrower of last resort. But as its external deficit exploded, so did the domestic borrowing of US households, stimulated by rising house prices. The result was the subprime mortage crisis of 2007. In this expanded paperback edition. Martin Wolf includes a substantial new chapter on the global banking crisis of 2008-9 which has seen the argument of this book becoming the conventional wisdom among G20 policymakers. Only by tackling imbalances in the international financial system is there a chance of global financial stability.