Excerpts:

"Despite the fears of the still-influential former Treasury secretary Robert Rubin, investors around the world were more than happy to buy new issues of US Treasuries, no matter how voluminous. Contrary to conventional wisdom, the quadrupling of the deficit did not lead to falling bond prices and rising yields. Instead, the flight to quality and the deflationary pressures unleashed by the crisis around the world drove long-term yields downwards. They remained at close to 3 per cent all year.

Nor was there a dollar rout, as many had feared. The foreign appetite for the US currency withstood the Fed's money-printing antics, and the trade weighted exchange rate actually appreciated during 2009.

Here was the irony at the heart of the crisis. In all kinds of ways, the Great Repression had "Made in America" stamped all over it. Yet its effects were more severe in the rest of the world than in the US. And, as a consequence, the US managed to retain its "safe haven" status. The worse things got elsewhere, the more readily investors bought Treasuries and held dollars.

For the rest of the world, 2009 proved to be an annus horribilis . Japan was plunged back into the deflationary nightmare of the 1990s by yen appreciation and a collapse of consumer confidence. Things were little better in Europe. By the first quarter of 2009, it became apparent that the problems of the European banks were just as serious as those of their American counterparts. Moreover, in the absence of a European-wide finance ministry, all talk of a European stimulus package was just that - mere talk. In practice, fiscal policy became a matter of sauve qui peut , with each European country improvising its own bailout and its own stimulus package. The result was a mess.

Political instability struck China, where riots by newly redundant workers in Shenzhen and other export centres provoked a heavy-handed clampdown by the government, but also a renewed effort by the People's Bank of China to prevent the appreciation of the yuan by buying up yet more hundreds of billions of dollars of US Treasuries. "Chimerica" - the symbiotic relationship between China and America - not only survived the crisis but gained from it. Although Obama's decision to attend the first G2 summit in Beijing in April dismayed some liberals, most recognised that trade trumped Tibet at such a time of economic crisis.

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This asymmetric character of the global crisis - the fact that the shocks were even bigger on the periphery than at the epicentre - had its disadvantages for the US, to be sure.

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Those who had feared galloping inflation and the end of the dollar as a reserve currency were confounded.

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On the other hand, the troubles of the rest of the world meant that in relative terms the US gained, politically as well as economically. Many commentators had warned in 2008 that the financial crisis would be the final nail in the coffin of America's credibility around the world. First, neoconservatism had been discredited in Iraq. Now the "Washington consensus" on free markets had collapsed. Yet this was to overlook two things. The first was that most other economic systems fared even worse than America's when the crisis struck: the country's fiercest critics - Russia, Venezuela - fell flattest. The second was the enormous boost to America's international reputation that followed Obama's inauguration."

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