This was the week that saw financial market turmoil spread around the world as the flight from risky investments sent emerging markets and leading stock indices plunging.

The global flight to safe haven investments was underlined by a risk index compiled by UBS, which exceeded the peaks that followed the Long Term Capital Management hedge fund crisis in 1998, and even the terrorist attacks of 9/11.

Analysts all over the world have been looking at what they call “the canary in the cage”, an example taken from miners who take down a canary with them deep into the bowels of the earth as a safety measure because the birds sense danger, and gas emissions, before humans do.

The canary in this particular cage, or to give another example, the proverbial butterfly that flaps its wings and sets off a tidal wave on the other side of the world, can be said to be Sarasota, Florida.

This pristine Gulf coast community seems an improbable cause for a world international crisis. Yachts bob lazily off a barrier island as bronzed children play on the sand. And the shoreline is dotted with a blend of exclusive beachfront residencies and family-friendly condominia that have attracted many international buyers, such as the author Stephen King.

What happened in Sarasota, and alarmed Wall Street economists tracking the worst US housing slump in 16 years, has been the biggest drop in house prices in the US, with foreclosures spiking after a drop of almost 15 per cent in the year to March. The price falls in Sarasota then spread across Florida – the west Florida housing bubble first inflated and then suddenly popped, threatening to drag Florida into recession.

But this won’t happen in Malta, one can hear people say.

Oh no? Just read on.

It is tempting to blame what happened in Sarasota on the rise in popularity of high-risk adjustable loans that were backed by complex new credit securities, which are now in distress and in some cases are regarded by other traders as worthless.

These innovative financial instruments did play a role, but according to what is being said by residents, real estate agents and mortgage brokers in Sarasota, what really brought about the crisis was a more familiar culprit: simple old-fashioned greed.

“People were buying places figuring they would put in a new kitchen and then flip them. It was greed. We were all in the same game. We were selling paradise,” said Christina Neff, a real estate agent. “Flippers are behind what is happening.”

Dorothea Sandland, another real estate agent, said: “A lot of buyers took out second mortgages, risky loans or even special bonds because they thought they could get rid of the property very quickly.”

Loan payments on a medium-priced home in the state reached more than 30 per cent of median state income last year, compared with an average 18 per cent in 2003 and a national rate of 23 per cent, according to Goldman Sachs.

The risk-taking by home-buyers willing to bet money they did not have, that prices would keep rising, has been a key cause of the global credit crunch the world is now experiencing.

But not in Malta, did you say?

It is the people down at ground level that can but won’t say what percentages of loan payments are being made, or how many people have multiple loans. But it is more than mere speculation that there is an inordinate number of people here who have taken up property speculation, which is based on the principle, or belief, that house prices will go up and up and up. Although the mainstream banks and financial institutions have been quite conservative, and in most recent times have pulled in even further, there do exist official and unofficial sources of funds that are not so prudent.

What makes matters worse here is the changeover to the euro and the necessity for many people to bring out undeclared funds, and who did not trust the government’s special scheme created for this reason. On the other hand, what could make Malta no Sarasota 2 is the fact that being such a small island, available land for development is in short supply. And the other fact that, unlike Sarasota, the credit funds backing speculation do not seem like creating a domino effect, unless there is something we cannot see.

Even so, however, it is the same greed, in Sarasota and in Malta, the same betting of money that people do not have, which will keep prices rising. There is a glut of unsold newly-built building stock lying unsold, a glut of unsold old property in the village cores just waiting to be pulled down and “developed”.

And this is pre-election year when pressures are enormous, safeguards fragile and quick bucks made. Malta may not be the world’s canary in the cage, but Sarasota could be the canary in the cage for us all, if we are wise enough to grasp the implications.