It could be a crucial test not merely for hedge funds but for the whole system of capitalism.
With markets going through yet more gyrationssparked partly by the S&P downgrade of U.S. Treasury securities and amid recurring concerns about European sovereign defaultsmany investors will no doubt have spent an anxious August holiday. Many will have been thinking: Are we about to witness a rerun of late 2008?
It is not a pretty thought. Last time, after Lehmans collapse, a complete meltdown was averted only by a huge bailout of the banks by Western governments. This time, the governments themselves are teetering, and nobody, it seems, has the resources to bail them