Land of the Tweedles

This, however, is not a sustainable path to recovery.

Firstly, borrowing money and gambling on rising asset prices is what got us into this crisis in the first place: relying on a recovery in private debt to get us out of this slump is like prescribing more cancer as a cure for cancer.

Secondly, it's highly unlikely that either country can sustain the acceleration in debt that is needed to keep the Credit Impulse positive, because if they did, then at some point falling debt would have to give way to rising debt once more. Call me crazy, but I just can't see that happening.

Figure 8

So what is likely to happen soon-and sooner for Australia than for America-is that the positive boost from the Credit Impulse will run out, and turn negative again. If, at the same time, the government's input turns negative courtesy of deficit reduction, then the recession will return.

Ultimately, the only way out of this crisis is to abolish the debt that caused it: debt that financed speculation on rising share and house prices rather than to finance genuine investment. As Michael Hudson puts it so simply, debts that can't be repaid, won't be repaid. At some stage-maybe ten years after the Great Recession began, we'll finally learn the truth of that eloquent aphorism, and tackle the real cause of this crisis.

But until then, we'll distract ourselves by watching the pointless debate between Tweedledum and Tweedledee.

• Limit the First Home Vendors Grant to new housing only;

• Limit new Negative Gearing to new housing only; and

• Bring the capital gains tax rate back into alignment with the income tax rate.