This has created what economists call moral hazard, whereby banks feel able to take increasingly big risks to make profits knowing they will be rescued if their improvident lending puts them in jeopardy of collapse.

Put another way, they are like a teenagers with mum and dad's credit card, spending up big while all the while knowing that paying back the accumulated debt won't be their problem.

Sir Mekere Morauta has pointed out what should be blindingly obvious to those who are willing to see it: the O'Neill government's policies are placing Papua New Guinea’s banking institutions in mortal peril.

Some heroic assumptions appear to have been made about the underlying robustness and stability of not just PNG's economy but that of the wider world as well.

History shows that, within a capitalist system, betting that nothing can or will go wrong is an exceptionally stupid bet.

Right now, globally, total private debt as a proportion of GDP is much higher than immediately before the GFC and is climbing rapidly. The highest and fastest rises are occurring in Hong Kong and China. Australia is not immune from this phenomenon.

Total government debt is also much higher than before the GFC because governments have had to recapitalise their private banking systems to prevent their collapse.

Governments have also borrowed heavily in an effort to stimulate economic growth, which across most of the world remains anaemic at best.

This is not a situation that would encourage a prudent banker to take major risks with bank funds, yet this is exactly what is happening in PNG.

The history of banking failures is that the people creating them never think there is a problem right until the moment that a collapse is imminent. As was the case for powerful institutions like Lehman Brothers, this can happen, quite literally overnight.

PNG's situation, much like Australia's and many other countries, is far more perilous than their respective governments are willing to admit.

Not only do governments not know how to stop the rapid accumulation of unsustainable private debt but their great fear is that even acknowledging the growing problem might trigger the very crisis that they are desperate to avoid.

Like the proverbial rabbit in the headlights, they can see the oncoming truck but remain paralysed in its path.

My fervent wish is that someone, somehow, is going to be able to do something to prevent a repeat of the GFC but I fear it is too late.

If I am right, then the PNG's banking system will very likely collapse. That is a high price to pay for the O'Neill government's financial recklessness and profligacy.