“The massive expansion of state control over the banking system may counter the powerful forces threatening to destabilise the financial sector and the currency markets. But, at best, all that the government-led rescue packages can achieve is a framework for managing the imminent decline of economic activities. Banks may have been rescued, but at present there is no strategy for re-engaging them with the rest of the economy.It is evident that there is a lot more pain to come. Existing levels of state expenditure cannot be maintained without unleashing massive inflationary pressures, the outcome of which will be cuts in living standards. In any case, the choice is not between inflation and deflation. We are likely to see both as the contraction of credit forces numerous businesses to cut investment and production. Nor will it be easy for companies to export their way out of the predicament. There is now the danger that the global flows of goods, like capital investment, will decline.” (10/15/08)