A dead-cat bounce appears to be underway in the US. Under the heading, “Refinancing avalanche threatens European banks,” Open Europe is reporting a €2trillion black hole in European banks. Nothing is going right on either side of the Atlantic. If you find yourself personally in trouble, try Quick loans.

The think tank says, “FT [Financial Times] Deutschland reports that there is a ‘€2,000 billion problem in European banks’. It notes that ‘the real stress test still has to come. Banks must refinance billions. A refinancing avalanche is coming their way’.” Personal refinancing is possible with payday loans.

As for America, the Telegraph’s Jeremy Warner writes on his blog: “… the IMF in its ‘selected issue paper’ on the US economy calculates that ‘closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.’ As Professor Kotlikoff notes, the entire Federal tax base amounts to 14.7 per cent of GDP, so to close the gap from a revenue perspective would require the authorities to double the rate of taxation in the US.”

There are also reports that the Fed has begun a second round of Quantitative Easing (QE, or printing money in the vernacular). Labelled QE2 or QE Lite, it’s thought to be preface a plumping up the Fed’s balance sheet from $1.2trillion to around $5tr in the near term.

Both the US and the eurozone appear to have intractable problems going into the medium term. The notorious “double-dip” seems ever more likely, but what chance of a new Great Depression?

On Tuesday, the Bank of England began the arcane process of printing money by buying back the government’s debt.

The decision has had mixed reviews from the press.

The potential inflationary effects are the main are of concern. Others take the line that the Bank could do little else to boost the money supply, while a few politicians have pointed out that broad money (M4) is already rising by 20+ percent.

A good primer on the pros and cons is given by the BBC’s Business Editor, Robert Peston on his blog:

Will QE work?

Not to be outdone the BBC’s Economics Editor, Stephanie Flanders, also weighs in with an informative piece on how the Americans are doing it — mainly by buying corporate bonds, not Treasuries:

Ahead of the curve

My favourite is by the Daily Mail’s City Editor, Alex Brummer, who today gives an emphatic thumbs down to the whole operation.

Bank’s great experiment may prove gamble too far

Syntagma also greeted the “new dawn” of lumpen monetarism with incredulity:

Watch out for the mashed potato machine

Food for thought.

The International Monetary Fund, as predicted, is now forecasting that British gross domestic product will contract 2.8pc this year, worse than the U.S., the eurozone and Japan.

Last year we reported here on the first use of the “T” word (trillion) for losses across the banking sector. Now we’re into the “2T” word, a graphic indication of how much conditions are deteriorating around the globe.

The IMF expects the US economy to contract 1.6 percent; Japan to shrink 2.6 percent and the eurozone to decline 2 percent. Overall, the IMF expects the global economy to expand 0.5 percent, its weakest showing since the Second World War.

Economists at the IMF also estimated that bank losses may reach $2.2 trillion, almost twice the $1.4 trillion the organization predicted in October.

It warned that, “unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth.”

In Britain, the bank bail-out is already projected to take national debt to 8 percent of GDP, and today the Institute Fiscal Studies warned that national debt levels are unlikely to return to the pre-crisis levels for more than 20 years.

During and after the Great Depression of the 1930s many people asked the same question.

As it turned out, capitalism wasn’t dead, just undergoing one of its periods of creative destruction, when old practices and outworn businesses are ruthlessly purged.

Free markets are a natural phenomenon, like grass. If you cut grass, it grows back again. So does capitalism. It is government that is an unnatural construct of human ingenuity. Long, hard-won experience tells us it should be limited in size and scope.

John Evans has written a piece on what will happen to capitalism under the title, Is socialism the new quid on the block?

The “failure” of capitalism should be seen as part of a greater failure involving government and its duties to society. These are principally, sensitive regulation of systemic elements of the modern economy, like banks and other financial services, and ensuring monetary and fiscal balance across its operations.

It is now clear that government has failed systemically over the past decade by taking on too much debt, a condition mirrored in consumers’ personal balance sheets, and by serious mismanagement of the regulatory process.

Read Is socialism the new quid on the block?