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His analysis centred on the six major mistakes that have been committed by the world's largest economy since the late 1980s in what he calls a US national delusion.

The first mistake was made during the Ronald Reagan administration, when Paul Volcker was fired as chairman of the Federal Reserve Board in 1987, and Alan Greenspan appointed in his place.

In Stiglitz's opinion, Volcker - now a key advisor to President Barack Obama - did what central bankers should have done those days, especially in terms of reining in inflation.

During Volcker's tenure, inflation was down from more than 11 per cent to under 4 per cent. Also, the former Fed chairman believed that financial markets needed to be regulated.

However, then-president Reagan did not believe so and, instead, appointed the free-market zealot Greenspan to succeed Volcker.

In his double role, since the Fed controls the country's money supply, Greenspan used his power to its full extent during his early years and at the same time, regulated the markets.

This combination, however, proved disastrous later on, as Greenspan ended up being at the helm of two financial bubbles. After the dotcom bubble popped in 2000 to 2001, he helped inflate the housing bubble.

The central bank's topmost responsibility should be to maintain the stability of the financial system, and if banks lend on the basis of artificially high asset prices, the result can be a meltdown - as we are seeing now, Stiglitz argued.

The second big mistake was tearing down the walls separating investment banks and commercial banks in 1999.

That year, the US Congress repealed the Glass-Steagall Act - the culmination of a US$300-million (Bt10.7 billion) lobbying effort by the banking and financial-services industries, that was spearheaded in Congress by Senator Phil Gramm.

Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organise the sale of bonds and equities).

It was enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest.

For instance, without separation, if a company whose shares had been issued under the strong endorsement of an investment bank got into trouble, wouldn't the bank's commercial arm, if it had one, feel the pressure to lend it money, perhaps unwisely?

The third big mistake was cutting taxes during George W Bush's administration. In Stiglitz's opinion, it was like "applying leeches" to the current crisis.

Enacted first on June 7, 2001, with a follow-on instalment two years later, Bush and his advisers believed that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease.

These tax cuts are the modern-day equivalent of leeches and have played a pivotal role in shaping the background conditions of the current crisis.

Fourthly, the numbers we saw in US corporate accounts are fake due to the wrong incentive structure, with stock options being the chief culprit as far as inflating share prices is concerned.

Stiglitz argued that US authorities failed to pay attention even in the wake of a series of major scandals - notably the collapses of WorldCom and Enron in 2002.

The scandals involved every major American accounting firm, most of the US banks, and some of the premier companies, and made it clear that there were serious problems with the United States' accounting system.

Fifth came the October 3, 2008 bailout package of failed US financial institutions, which was the final turning point whose consequences will be felt for years to come.

Driven by wishful thinking, US authorities hoped that the bad news was just a blip and that a return to growth was just around the corner.

Last but not least, the US-led financial crisis has been caused by what Stiglitz says is the national delusion that markets are self-correcting.

Actually, they are not.