Calderón s contradictory stance is rooted in the reflexive habits of a Mexican political class trained to gain points by kicking the US. Calderón, too, has sought refuge behind the folds of the Mexican flag and in diatribes about sovereignty under siege.

That is, an increase in the willingness to lend tends to increase the value of the collateral, and also improves the borrowers performance, thereby encouraging a relaxation of credit criteria. Bubbles recur, especially in real estate, because this reflexive relationship is repeatedly ignored.

Another major point of contention is China s reflexive support for Pakistan s efforts to destabilize Ladakh and Kashmir, buttressed by deepening military cooperation. This aspect of China s foreign policy is puzzling, not only because it undermines relations with India, but also in view of Chinese fears of Islamist radicalism among the Xinjiang s Uighurs.

We must address, with restraint and prudence rather than with a reflexive nein the difficult question of whether military means are necessary to safeguard political solutions. We do not know when and where the next crisis will erupt, but we do know that it will and that we must be better prepared when it does.

The world has learned since 2008 how dangerously financial expectations can interact with policy blunders, turning modest economic problems into major catastrophes, first in the US and then in the eurozone. It would be ironic if China s Communist leaders turned out to have a better understanding of capitalism s reflexive interactions among finance, the real economy, and government than Western devotees of free markets.