Let us now pray this was the last waking up from a wish-dream for a while

Sir Martin Wolf rightly calls out the fact that “The world wakes from the wish-dream of decoupling” October 22, although, sincerely, I have yet to meet anyone that was not long in emerging markets that really believed in that.

But when Martin Wolf, sounding a bit like a financial policy macho-man, says “this requires Keynesian remedies. Budget deficits will end up at levels previously considered unimaginable. So be it.” we must now pray for not having to wake up from another wish-dream where budget deficits were decoupled from the lack of confidence in currencies and the consequential inflation.

I would be much more comfortable recognizing that there are some real limits to budget deficits and thereby force the need to assign priorities intelligently to what can be done.

In doing so, I would absolutely agree with Martin Wolf that one of the first things to be done has to be “enhanced procedures for restructuring debts of bankrupt households” since the only way we could be sure of that what in that area is being done is sufficient, is that whatever remains in the mortgages duly merit the triple-A rates previously wrongfully awarded.