Observers such as legendary fund manager Mohamed El Erian believe that the financial crisis has precipitated a sea change that will take the West to a ‘new normal.’ That would be a problem. Meanwhile, however, Wall Street has returned to the Old Normal and is on track to reach record levels of compensation this year.

The “credit crisis” caused banks to write down about $1.5 trillion, but that is the tip of the proverbial iceberg. The real consequence of the post-bubble deleveraging is the vaporizing of about $26 trillion in stock-market value worldwide, or about half of the valuation at the 2007 peak. The rally in global equities from the 2002 low obviously relied on an artificial abundance of liquidity.

This week we discuss the economic forecasting ability of the World Bank over the last decade, which, despite access to mountains of grassroots data, under-estimates growth in good times, over-estimates it during crises, sometimes misses crucial turning points and only occasionally gets things right.