What worries me is the herd mentality about it all.  Now every state is borrowing heavily to staunch the losses and provide stimulus - but if everybody is doing it - does that not simply devalue the currencies it is done in - i.e. not relative to each other, but relative to real goods and services.  We may not have inflation on the Zimbabwe model, but the value of money itself is being devalued.

At some stage the real economy has to bottom out. Oil and commodity prices have gone down dramatically.  Interest rates are approaching zero.  The real cost of doing business should be declining rapidly.  At some point people will start buying again - and then the herd mentality will go in  reverse, and everyone will join a mad scramble to buy up hugely cheap assets.

Anglo Irish Bank is worth 1% of what is was worth a few months ago.  Huge businesses are available for almost nothing.  The over-correction could be as bad as the current slump resulting in extreme boom and bust cycles.  Governments will have to be much more nimble if they are not going to be caught again on the rebound...

notes from no w here