With the world's financial system rocking, economists have diagnosed a cause of the crisis and prescribed a possible solution. The problem, it seems, is "haircuts" - the amounts subtracted from the market value of assets, such as government bonds, that are used as security when a bank borrows cash from another bank. In boom times, haircuts range from 1 to 10 per cent, making it easy for bankers to borrow. Having a plentiful source of cash tempts them to gamble on risky investments, as happened in the run-up to the crash of 2008.
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