The truth is sometimes simple, however elaborate the detail. The main feature of the world economy over the past few years has been the growing savings surplus of China and other Asian countries. Until recently it was offset by consumer borrowing in the west, especially in the US and the UK.

This had to come to an end because of unsustainable consumer debt ratios. There is no early prospect of this thrift being balanced either by an investment boom in the west or by investment in non-Chinese developing economies. Nor is China going to reduce its savings surplus on the scale required either directly or by appreciating the renminbi in response to international pleading. The hole in the world economy can only be filled by deficit spending by the stronger western governments. If this is inhibited by fiscal tightening, recovery will be strangled.