More glad tidings

Guardian Unlimited | The Guardian | On the edge of a precipice The underlying problem is that since the mid-1990s, share prices are up by 200% but corporate profits - as measured by sober government statisticians rather than dodgy auditors - have risen by 40%. It is conceivable that Greenspan would have to cut, cut and cut again before Wall Street responded. Even then (and assuming there is no invasion of Iraq to complicate matters), there is a risk that the easing of policy will simply lead to a re-run of this year - a short-lived burst of euphoria followed by the realisation that companies cannot produce the earnings expected of them. Greenspan and Bush would then be in an even worse quandary than they are now, having used up nearly all the shots in their locker. Meanwhile, Europe and Japan - heavily dependent on a US recovery to keep their economies ticking over - would be faced with the prospect of deep, prolonged recession.

If this sounds gloomy, that's because it is. It would be the most critical moment for the global economy since the 1930s. There would, however, be one silver lining: people would ask how we got into this mess in the first place. The answer is that policy makers, dazzled by Cramer, Glassman and their friends in the financial markets, deliberately removed the brake pedal from global capitalism. And, as any engineer knows, the brake pedal is what allows the machine to travel safely at speed. Without it there are only two speeds - dangerously fast and dead slow.