SINCE the beginning of August, a new wave of the international financial crisis has battered world markets.
The International Monetary Fund's managing director, Christine Lagarde, noted in her speech at the Jackson Hole meeting of Western central bankers last week: "Developments this summer have indicated we are in a dangerous new phase."
The most intense problems, as in 2008, lie in the banking system. It is therefore important to make a sober assessment of the relative state of Chinese, US and European banks as they face this.
The first wave of the financial crisis in 2008 bankrupted and brought to the verge of bankruptcy several major Western financial institutions including Bear Stearns, Lehman Brothers, Citigroup and Royal Bank of Scotland.
What is striking about the new situation, therefore, is that a fresh wave of banks are now clearly considered by markets to be at risk.
Most prominent of these is Barclays, with a fall in share price of 83 percent in dollar terms since its peak, and Bank of America and SocieteGenerale - both of which have suffered 84 percent falls in their share prices measured in dollars.
Simultaneously, insurance rates for UK, French and Italian bank debt have risen to higher levels than in 2008.
In response to mounting problems, Lagarde called for new efforts to recapitalize banks. She said: "They must be strong enough to withstand the risks of sovereigns and weak growth. This is the key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries."
An even more urgent problem is liquidity drying up at European banks. Three-month interbank lending rates for euros have reached their highest levels since 2009.
Banks in Italy, the new country facing the possibility of eurozone "contagion," doubled use of European Central Bank funding facilities in July to 80 billion euros - their highest level for over four years.
At a surface level the causes of the bank crises in the US and Europe appear different.
In the US the core of the problem is not the clash between President Barack Obama and the Republicans in Congress. US Treasury bond prices are currently at record highs and no immediate issues exist in servicing US debt.
The crucial problem in the US is the depression of household incomes by the financial crisis due to wage reductions and increased unemployment. This has hit business sectors dependent on consumption by those with average incomes - for example Wal-Mart.
It lies behind the prolonged depression of house prices, which transmits itself into the financial system through the threat of bad mortgage loans to Bank of America and other institutions.
In Europe the immediate crisis is not private but government debt.
Greece has announced a 21 percent partial government debt default. It is widely feared it will not be the last country to do so - threatening European banks which have large exposure to state debt.
But actually US and European banking problems have a common root - lack of economic growth.
Until there is economic growth in the US, household incomes will not rise significantly for those in work or presently receiving unemployment benefit.
In Europe the experience of Greece and Ireland has shown that budget deficits will not come down significantly without growth. But with growth, US household incomes will rise and European budget deficits contract, and the banking crisis will abate.
This macro-economic fundamental explains why China's banks do not face systemic risk. In the year to the second quarter of 2011, China's gross dometic product rose 9.5 percent, while in the same quarter US annualized GDP growth was 1 percent and the eurozone's was 0.8 percent.
China ran a budget surplus in the first half of 2011 and its budget deficit last year was only 2.5 percent of GDP, so it has no fiscal crisis.