The markets gave up their attempt to recover yesterday:

Source: FT

The flight to safety was vert obvious. US bond returns are their lowest for sixty years:

Source: FT

But no one is cheering. The reality is that the markets are failing to bounce. The springs are getting worn out. The realisation that there's no growth to be had in world markets has dawned. The appreciation that universal application of government austerity programmes guarantees not just recession but possible depression has at last arisen. And the markets are saying 'we're in deep trouble now' or words somewhat more robust to that same effect.

So what now? George Osborne will, of course, have us bunker down for recession -m which will not, of course be his fault. Except he blamed Brown for the last one and can't avoid responsibility for this when on this occasion blame can fairly be apporetioned.

And some will suggest quantitative easing. But that wouild be a mistake. QE right now can only give banks money. Nothing can make them pass it on, and maybe people won't ask them to do so - becasue there is no demand for borrowing at present as no one wants to inbvest.

There is only one way out. It is government spending that will save us from this mess. There is no alternative. I'll say it until I am blue in the face, and don't care how boring it gets. Saving jobs, realsing people's potnetial, prioviding a future - these are all tasks for a Courageous State, and right now we have cowardly ones who will do anything but what is needed.

Yes, that's a book plug. But I happen to think nothing could be more timely than the creation of a rash of politicians who believe that they have the power to solve this crisis - which as a mater of fact they have, and which only they can exercise.