if the european press is desperate for a 'resolution' in America, they must decide between helping themselves or obama.

The current democratic speaker of the house does NOT want a deal. Economic uncetainty has provided the best of possible environments for Obama's chances in Nov.

mark , tennessee, usa

It is a wonder that the ECB, BOE and Fed have not already consulted you, for surely they have overlooked your sublime solution and the fearsome logic that underlies it.Why do we need economists when we have journalists? Liquidity and debt are not the same thing as any accountant could tell you.

J Keynes, London,

In order to achieve the necessary reductions in co2 emissions to avoid runaway climate change the economies of the developed world will have to contract and then converge with less well developed, less polluting economies. It seems that the credit crunch is going to start this painful transition

sheila, LEICESTER,

We are heading for a world DEPRESSION. Its as simple as that.

louis , Liverpool, UK

The final denouement of the "Greed is Good" philosophy that has reigned ever since Ronald Reagan's election in 1980. Now, perhaps, we can admit that there is a role for "Big Government" and that market forces alone cannot solve all problems.

Roman, Chicago, USA

This is assertion, not reasoning. There are no circumstances - ever - in which a subject of controversy is beyond debate. Attempting to claim that it ought be is a dishonest attempt to suppress scrutiny.

It is not a legitimate function of government to invest in failing private enterprises.

James E. Petts, Burnham, England

Great changes are always preceded by great turmoil.

Chros, London,

Nice article. However "hope" is passive and we need action. The problem lies perhaps much deeper. We are all hypnotized in thinking that capitalism and marxism are the only economic systems available to us. But we had an ecomony long before the Wealth of Nations or Das Kapital. An historic note.

Wim , Volendam, Netherlands

Lend willingly, lend expensively. Central banks should lend as much as is needed and charge a good, high rate of interest. Let it be deferred as long as it need be.

Frank Upton, Solihull,

It is well known that only suffering makes people intelligent.
Can everybody please look at the concept of transition economies as we are facing not only peak debt, but peak oil, peak water and in 60 yrs peak uranium.... Solar and waves is infinite. Please if you love anybody incl yourselves think!

Esther Phillips, Leatherhead,

Brilliant idea. Run the printing presses flat out printing free money. Inflate our way out of our troubles. Welcome to Mugabenomics.

Your "remedy" would ruin all of us. Not just the imprudent lie-to-buyers and borrow-to-letters.

Tony Peterson, kendal, uk

you havettotally misread the future, a period of value for money house prices that reflect the minimun wage, shop full of quality not tat, worker that ask their boss for a rise not their credit cads, simple living on the wages not credit.

michael joseph, cahersiveen.adams towns, madness

We have entered an era where the world financial system has changed so much that it has become impossible to predict the future from the experience of the past.
We do not know where we are heading, so Its no good using old solutions to prop up past practices. Assets must find their true value.

dudley holley, Thorpe Bay, UK

Your telling us too late that we are in for economic misery. Why didnt you tell us earlier so we could have done somthing about it?

barry smith, London, England

For all the talk of how wonderful Mr King is and the right approach taken by the ECB on inflation, nothing will be more galvanising for governments when protesters hit the streets...and they will.

Plastic surgery is pointless for those who are dead. We sit by beach as the sunami roars in...

David Downes, Chester, UK

Free money and hyperinflation: Germany did it in the 30s...US took the pill of correcting excess credit by lack of credit for a while...this time, they'll go the opposite way!...but all will pay the price of excess credit and banking laissez faire, bubbles and "thiefery" ...Where are Hitler & Stalin

Antoine, London, UK

Well thanks for casting a few pearls of wisdom, Gerard....

But I seem to recall your earlier prognosis in about May when you were asking where were the grapes of wrath....? And your witty aside that that the economic chill had produced mere raisins of wrath... What now, the melons of wrath

belacqua, London, UK

The whole systems rotten and always has been.Since the industrial revolution money has been made above all else,causing war,polution slavery,loss of traditions and moral values all for the sake of making an elite few rich.We are near the end and hopefully a brighter future awaits.Itsgonna get rough!

Rob, Manchester,

This is Greenspan's 'The Man Who Saved The World' legacy - cutting the interest rate to a silly 1%, post 9/11 thus forcing other central bankers to lower theirs...

cww, Ipswich, UK

Reflating an already failed economic model is just going to drive the nail deep into the coffin of the US and UK. The BoE must stick with the ECB. There will be pain of economic adjustment.
NO PAIN, NO GAIN!

Stephen Marchant, Newton Abbot, UK

We only need to look back to Japan in 1990 to see where this will lead. A quick fix today will only postpone the inevitable - the risk being that it takes 10 -15 years to work through. The Japanese will tell you about "free money"...rates have been close to 0% for many years, for little benefit.

John, London, UK

I predicted this 6 years ago: house prices didn't relate to people's incomes, there was a huge increase in the use of self-certification mortgages and independant financial advisers; I fixed my mortgage for 10 years in response. Yet never once did I hear you or any politician express concern.

Philip T, Leeds, West Yorkshire

Providing cheap money doesn't work....Alan Greenspan did this and it let directly to the housing bubble. The solution is to provide decent paying jobs and make sure government signs "fair" trade agreem that benefit the domestic workers; not hurt them. You need a middle class and you need manufa jobs

Terry, New York, 10011

Blame the Republicans - the deregulators (McCain included). To quote from Al Franken "Republicans complain about how our government is broken. And then they get elected and prove it.". Government and regulation can work...sad truth is the Republicans are just not up to the job...

Terry, New York, USA

Forget the Housing Market. It is now DEAD and will be for quite some time unless people have short memories. Majority of people will be in negative equity for at least 10 years.

Louis, Liverpool, UK

In addition a global economy can only work if you have "one global currency" and "one global regulatory body". China who pegged their currency (the Juan) to the dollar give them an unfair advantage, With once currency all countries would be competing on a level playing field......

Terry, New York, USA

Countries would have to compete based on their country's raw materials and their labor force..you would also need to have global labor laws so companies could no longer exploit workers in a poorer country....if this is not possible..I would like to see the US go back to be independent in all areas..

Terry, New York, USA

Obviously Baker is a fan of the Zimbabwean economic model.

Thank God for Mervyn King.

Martin Clarke, Leicester,

Previous bailouts have resulted in even bigger bailouts. Face the problem, and let the markets sort out bad management. Invest the $700 billion in expanding jobs and productivity. Give Americans rebates for investing in solar thermal and voltaic, creating jobs in construction/manufacturing/suppliers

Hugo van Randwyck, London, UK

Gordon Brown said 'I will not let house prices get out of control'. So he knew there was a risk, presumably because he knew of the dangers that would ensue , yet he sat back & let it happen - due to 6x increase of stamp duty from £600m to £3,600 m in a few years. His nose was too far in the trough

Steve, West Wickham, UK

I want to know when letting bad companies go bust suddenly became a bad thing. In general I'm with Robert Harris, with the caveat that governments should be seeking to improve depositor protection and SME lines of credit to prevent the systemic problem of a run on the banks.

Corrupted Mind, London, England

Surely 'growth' cannot go on forever??
It alsomay be that bailing out imprudent bankers (gamblers) goes against the grain for most people, but there is no other way in these circumstances. A depression is something beyond living memory, but it's effects included suicides, hunger and homelessness.

David Nammory, Liverpool,

"Central banks now should essentially be providing free money — as much of it as necessary — to the entire financial system."
Such a great idea! Why nobody's done this before? Oh, wait - some did. Ended in a hyperinflation so. But this time it will surely be all different.

Ilia, London, UK

History confirms the natural order of life is that the strong become stronger while the weak perish. Any attempt to prevent the inevitable always exacerbates the problem. Nationalise failing firms within an industry and you condem the industry. U.K. banking IS the essence of the U.K.'s economy !!

Fred Russell, Dubai, U.A.E.

The penny is finally starting to drop. The Western world has been living on credit for years, we did have time to turn it around; unfortunately in my opinion time just ran out. From here the situation is going to get extremely serious indeed. This is the the result of mass economic self-delusion.

paul, Carlow, Ireland

I fully agree with Robert Harris, Perth, Australia. You are simply advocating a quick fix so that we can get back to the good old days rising house prices, profligate lending, bankers with their snouts in the trough, etc. We need to squeeze the weaknesses out of the system now.

Steve Cox, Porthcawl,

Michael Steele, Memphis: Frightening that Americans fail to understand that their world-view is horribly flawed and has now terminally hit the buffers. Welcome to to the real world: you won't like it very much, but so what?

John, London, UK

In the 80's the S&L crisis, 90’s the Asian economic crisis and the Mexican crisis, etc.
No one even remembers those "catastrophes" now
"Illiquid collateral" phenomenon is hardly new, it marks every economic cycle.
All resolved with the US Fed intervention.
Try to recall this "crisis" in 6 months !

NMB, California, USA

to paraphrase Dr Johnson "Necessity has a marvelous way of clearing the mind."

glenn schaefer, holbrook, us

Good article. The only problem is that the world is so gummed up with debt that even lowering rates, increasing liquidity will not revive the US and UK economies. We are heading for depression, high inflation, falling currencies, massive Govt debt, unemployment etc.Can't stop this train wreck!.

MGrelton, Bath, UK

The USA that we all worshipped was dreamt up in Hollywood & was financed by credit cards with loan shark rates.
The insane, sub-urbanized, de-centralized, public-transport deprived, oil-consuming automobile utopia just ran out of juice & can no longer be maintained or even tolerated by mankind.

Michael Willis, DETROIT, USA

Totally agree that the easing of monetary policy is essiential, with the caveat that the help is directed to investment in infastructure etc. Providing jobs by investing in the future is a priority. I would favour a buy back for troubled owner/occupiers so that they can rent to remain in their homes

Damien Vaugh , London, UK

People should understand that both free market and government interventionism are not absolute principles and cannot be worshipped. They can be useful or useless at times, according to circumstances.

Osvaldo Loisi, Buenos Aires, Argentina

Frightening that a man from Perth, Australia understands American history better than nearly all Americans do. Government got us into thus mess. They have also made a mess of education, energy and everything else they have gotten their hands on. Health care is their next project. God help us!

Michael Steele, Memphis, Tennessee, USA

It is a frighteningly deep deep economic hole that world wide ecomony is getting into.We got there by chasing around on excesses of credit generating large debt without the true assets or an accurate value system.
What we are seeing is a huge economic correction .This will generate a depression

Mark West, Glasgow, UK

How about what we really need is TIGHTENING of monetary policy, real market level interest rates and NO government bailouts. Your recommendation is straight from Hoover/Roosevelt and would surely send this necessary recession (or more accurately correction) into a prolonged and deep depression.

Robert Harris, Perth, Australia

And all because house prices rose too much. Why, why, why did we let it happen. Oh yes, it's because everyone said it was a GOOD THING... Right, well done everyone. No thought to what debt means then. Nice one. The question is, do we do the same thing next time?

Bob Jones, London,

Well, thank you for comming around, finally!

Peter Adam, Chevy Chase MD, USA