Bill Clinton talks economics on David Letterman.

I am so impressed by the simplicity and kindliness in the approach of Mr Clinton seeing him on Letterman tonight. He continually plugs in his sober, off-hand way his partisan interest in renewable energy. Which was kind of dull.

But then David Letterman asks him about the economy and somebody runs electricity through his chair. Suddenly the chirpy, charming, president is back. He explains smilingly that when tech stocks lost value after the dotcom bubble burst in 2001 the money had to go somewhere, so it went into housing.

So, Letterman asks, who’s to blame?

Clinton explains that if you work on Wall Street you get paid on how many deals you do, and at the time the best or only deals going were in housing. The money needed somewhere to go. It went into housing because it had nowhere else to go. Indeed, we need new opportunities (such as renewable energy) for investment money to flow into.

The financiers used financial vehicles to stretch the money further, to leverage the money into more and more housing deals. They used derivatives, representing say 30 houses by the money it cost to buy one. They used the subprime system, which promised low mortgages for a few years to get people buying houses. The short term problem of mortgage foreclosures, oil prices, low consumer confidence, a nervous Wall Street – all these problems help point to the lack of good investments (such as renewable energy).

El Presidente waxed chirpy about the position of the incoming President. “If you follow game theory now would be a good time to take the top job, because at least things aren’t going to get worse,” he joked.

The truth is there is no-one to blame. The money needed somewhere to go. Wall St gets paid on how many deals you do. The industry requires tougher regulations, guarantees, reserves, and new opportunities (such as renewable energy). We need clean energy incentives. The basis for the housing bubble was not enough good opportunities, and too many bad incentives.

Mr Clinton quotes Churchill: “We [Americans] always do the right thing… after discarding all the alternatives.”

I reflect that Clinton touched on a raw nerve there in the American psyche. Much can be made of American optimism and energy, but the real dynamo that supports Western culture seems to me to arise directly from our experience of “hitting the rock bottom”.

Because when you consider it, there is no such thing as a rock bottom. There just arises a moment when you decide you’ve had enough and you need to change. And the joy of the United States both as individuals and a people is that they hit real rock bottoms – they frequently decide they’ve had enough and they need to change. They don’t suffer in silence. They don't let a recession become a depression if they can help it.

And I intuitively feel that the idea of “hitting a rock bottom” originates from American culture. The magnificence of folk like Mr Clinton is that they can walk through terrible times and come out the other side with their head up and their dignity, intellect, and genius intact. That’s really something worthwhile. And I feel tonight he probably inspired a lot of Americans to do the same.