The leaders of the world's richest countries have gathered in Washington beneath the economic equivalent of a falling piano. And despite a warning from the developed world's own economic think tank, the Organization for Economic Co-operation and Development, that a recession will be longer and deeper than most people thought, the OECD is encouraging G20 leaders to try and catch the piano before it hits the pavement.
Already the U.S. government has spent or earmarked more than $1 trillion it does not own trying to stop the falling economy. But so far, bailouts and stimulation packages have not worked.
Just this past week, the U.S. government announced that it has rung up its biggest government deficit ever. The latest increase takes America's total national debt to something over $10 trillion US, a number so large it is hard for us to comprehend.
But as Dr. Seuss would say, that is not all, no, that is not all. The U.S. government's total list of liabilities, including such things as unfunded pensions, is five or six times larger.
Difficult as it is to disagree with the OECD big heads, there may be good reasons for holding off on government stimulus packages.
The OECD says the G20 should follow the U.S. lead, stimulating the economy back to health with interest rate cuts and pouring in cash. Difficult as it is to disagree with the OECD big heads, there may be good reasons for holding off on government stimulus packages.
There's an old sailor's rule for surviving in a lifeboat. Don't take your first drink from your canteen until you are really, really thirsty. The logic is simple. When your body is flush with water it uses water recklessly. Once your kidneys, sweat and saliva glands realize there's a shortage, they all work to conserve and use the water far more efficiently.
Right now governments around the world are each pumping billions of dollars into the global economy. If this downturn turns out to be as long and deep as an increasing number of people now predict, they may have broken the piggy bank too soon.
Here's why: there is another way of looking at what everyone is calling the credit crisis, defined loosely as a shortage of money for lending and borrowing. That's recovery from a credit addiction. The implication of saying there is a shortage now, is that the levels of credit over the past few years must have been normal. Most economists now agree that is absurd.
Instead, the past decade has seen the largest credit glut the world has ever seen.
The hugeness of this money glut is hard to overstate. There was money for everyone. People borrowed low in Japan and lent high in Australia. Hedge funds borrowed many times their own worth to bet on stocks and commodities. Companies disappeared from the stock exchange bought with mostly borrowed money: Inco, Alcan, Hudson's Bay, Stelco, Dofasco, IPSCO.
And this wasn't just happening in Canada.
Around the world, governments were borrowing too. The U.S. helped pay for expensive wars while cutting taxes. The money they didn't have, they borrowed.
At the same time, banks around the world were lending ordinary people enormous amounts of money, mostly, but not only, against the rising value of their homes. People without jobs could get mortgages, credit cards and car loans.
There was so much money out there looking for a place to go, it didn't know when to stop.
Too much credit
To explain where all this money came from is too much for a short discussion. But in essence, it is a fact of economics that increased asset values allow increased borrowing, which increases asset values. The feel-good factor, that all ships are rising, makes borrowers feel safe borrowing and lenders feel safe lending. In fact, lenders were so euphoric they found new ways of lending money they did not really have, at levels far beyond those traditionally considered safe.
We hear about a bubble popping. But in credit markets, the image of popping is not a good one. Instead, in deference to my Saskatchewan relatives, I will ask you to think of a big steel grain bin with a smallish hole in the side.
A little over a year ago, some people began to realize that there was far, far too much money in the world and that a lot of it was, for all intents and purposes, imaginary. But the realization took time to set in. At first some insisted it was just a blip. But gradually people started lending and borrowing less. Stock markets began to lose trillions of dollars in value. House prices began to fall, first in one country, then in another. Construction projects are finishing; new ones are slow to start. Companies begin to go broke. People lose jobs. Consumers stop spending. Gradually more and more grain pours out of the giant steel grain bin.
Now, as the OECD recommends, governments are trying to solve the problem. Central banks are cutting interest rates. Governments are promising spending on infrastructure.
But here's the problem. There is no way governments can replace the trillions of dollars flowing out of all parts of the economy.
And even if they try, it may well be that governments are pouring more grain into the bin before it has finished leaking out. If that's the case, no matter how much they pour in, it's all wasted until the leak has been fixed.
The U.S. government has already pushed its borrowing to unusual - and perhaps dangerous - heights. It has poured billions into banks and insurance companies, with little to show for it.
Canada, with years of balanced budgets, has proportionally more room to spend. Using some of that money now to patch the hole in the bin is fine. But if you think, as many people now do, that the economy has a ways to go before it bottoms out, there's not much point in pouring grain into the grain bin until the outflow has slowed.
Let's go back to the thirsty survivor. We are in a rubber raft. There's no land on the horizon. There will be many thirsty days ahead. The G20 leaders are passing out drinks to those who ask, but maybe we should be thirsty a while yet, so there's water left when it will do more good.
Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC. He is currently senior producer of CBC News Business.