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IPE Journal looks at the economic events that defined our socio-political landscape in 2008, the year of the subprime.

- In The Beginning there was Northern Rock - nationalized in February by the UK government following a good old fashioned bank run. Following heavy losses in the subprime mortgage market, Bear Stearns was next to go: in March, the once-proud investment bank was sold to JP Morgan for pittance. In July, IndyMac Bank went into receivership.

- September Madness. Over the course of a few short weeks, the magnitude of the crisis hit home (so to speak) as financial giants fell like so many martini-and-oyster fuelled dominos. The highlights:

• Freddie and Fannie are taken over by the US federal government
• Merrill Lynch is sold to Bank of America
• The Federal Reserve offered loans to AIG and took an 80% share in the company
• Washington Mutual is seized by the FDIC
• Morgan Stanley and Goldman Sachs become traditional bank holding companies, bringing the era of independent investment banks to a temporary close.
• And Lehman Brothers - in what now appears to have been a hugely significant decision, Lehman Brothers was allowed to fall into bankruptcy and the credit crunch prompty shifted into a higher gear.

- Keynes returns from the wilderness. The collapse in consumer demand has led governments across the globe to initiate fiscal stimulus programs. The sheer rapidity of this about-face in policymaking is breathtaking. We've come to expect such measures from the likes of France and Sweden, but from the UK, US and (gasp!) Germany? Keynes was wrong on many counts and his proclaimed followers even more so, but Keynes' insights on the role of government during economic downturns have gained a new lease on life. For better or worse, the impact of government spending programs and fiscal guarantees will be a defining feature of 2009.

- Price of oil $140 -> $40. A May 5th Goldman Sachs report predicted oil would break $200 within 24 months. Ok, still possible, but six months later the commodity bubble had burst in spectacular fashion and oil was trading under $40 a barrel. The explanations for the remarkable run up in commodity prices of recent years are manifold: historic emerging market growth, global demand, dollar weakness, financial speculation, etc. The price apex was as much about psychology as it was fundamentals, what Donald Rumsfeld would eloquently call the realization of "known unknowns". The "peak oil" moment came in the minds of consumers, politicians and traders across the world, only to be swiftly disregarded as global demand collapsed. Even repeated OPEC production cuts couldn't halt the slide into 2009. Commodity countries from Russia to Mexico are feeling the pressure, with devaluations and political instability on the way.

- Dollar down, up...down? It is awkward to speak of benificiaries of the financial crisis, but the US dollar was exactly that in 2008. By the end of 2007, there was a growing debate over whether the dollar had entered into a sustained relative decline vis-a-vis the Euro, with many concluding the common currency would soon eclipse the greenback's status as primary global reserve currency. The credit crunch had undermined confidence in the US financial system, and hot money ran wild through commodity currencies and emerging markets. But then financial crisis accelerated, and the commodity bubble burst, and investors sprinted to the safety of US dollar. It hit multiyear highs against sterling, the Euro, and a slew of emerging market currencies. Looking ahead, the outlook for dollar appears decidely weaker in 2009. The massive spending plans of Barack Obama and easy money Fed will weigh on the gains of the past year, especially vis-a-vis the Euro and Yen. But the dollar will likely retain its strenght v. emerging market currencies and sterling, as investors continue to find security in the greenback and the UK falls into the abyss.

Notable economic events which could have shaped the course of our year [Update: for the better], but failed: WTO talks & the G20 meeting in November.

***Co-written by Rory Doyle