Alan Greenspan's tenure at the US Federal Reserve coincided with a period of unparalleled global growth, stability and prosperity. But the world economy has been warped since the 1997 Asian crisis by excessive saving in China and developing Asia, as well as in Japan and north-central Europe. Unsophisticated economic policies and primitive financial systems, notably in China but also in other parts of Asia, have resulted in the global economy now depending on unprecedented current account deficits and the willingness of America, Britain, Australia and increasingly Europe, to import goods and capital. This has led to a huge build-up of domestic debt The United States, for example, spends more than 106% of its annual GDP. Household debt is soaring relative to income. Easy money policies inevitably lead to over-stimulation and the risk of a slump. The confidence and capital gains needed to sustain large fresh take-up of debt, year after year, stoke the boom. Major interest rate increases are now needed to prevent inflation. When rates reach a level that saps confidence, with an overhang of excessive debt, household demand could collapse, probably in 2007. Then China too will have a violent economic downswing. The financial and geopolitical consequences will be profound.