The final countdown?

One of the few more cheerful pieces of this sad history is that, so far, China appears to have maintained more control of its credit and debt and therefore to have helped stabilise to some extent the global debt situation as well as its own. There is evidence even of control of the kind countries like Australia used to maintain growth and stability in the more responsible years after World War Two from 1945 to 1970.

This was illustrated by a fancied "coordinated" action by China on 30 November 2011 which relaxed reserve requirements for its banks. This reversed the tighter reserve measures the Chinese Government had imposed in the previous year or so. It is of special interest in that the release of funds is more likely to be effective in easing credit than a lowering of interest rates might have been.

It is availability of credit rather than just the rate of interest that is important in reckoning whether credit is tight or easy. This aspect deserves more searching study and the Chinese approach may stimulate it.

That point is just one of many suggesting that we must try to get back to macroeconomic and financial policies of full employment and stable growth which were characteristic of the period 1945 to 1970 in several highly developed countries, including the United States and most West European countries.

Those policies were the essence of national policies and drove economic and financial systems securely and confidently through what could have been the difficult post-war years, from 1945 to 1970.

In summary, we must act to meet the immediate financial and economic crisis through public management of the financial system and the adoption of such measures as a carefully sculpted moratorium on debt. To meet the more fundamental crisis over a longer term, we must get rid of excessive market volatility and restore stable growth and full employment. That can be done nationally only through effective government policies applied within a rationally regulated market system and, globally, through effective international financial and economic institutions characterised by the models of the period 1945 to 1970.

If we are, right now at this moment, at the tipping point, now is the time to start serious negotiation to be followed by serious action. The alternative will be to encourage further economic, financial and social degeneration and a further – and accelerating - slide towards political, social and strategic collapse.

The countdown might then well be to conflict of a catastrophic kind on a catastrophic scale.