3. What should be done next...

So, as Pushan said, don't look at sunk costs. Make decisions with the resources you have today and evaluate how you can grow those resources at the fastest rate.

That is where the fundamental debate starts. My limited understanding is as follows: If the world GDP grows at 3%, it can be fairly said that each person in the world can expect a 3% ROC.

Now a capitalist will say, each man for himself, if I get 6% and you get 0%, just too bad for you. Survival of the fittest I say.

A socialist would say, that since you have less capital to start with, you should have easier access to capital, which in effect is a higher rate of return. So the poor grow at 6% and the rich at 0%. Spread the wealth I say.

One thing that both these morons will agree with is that the 3% GDP growth has to be maintained. Otherwise the entire discussion is moot. Both morons are then out of work.

How do we secure the 3%? For that the first question is who is providing the 3% growth. If we are to believe the world's largest economy, small businesses drive this growth.

Small businesses needed daily WC to run. Banks, performing their original task of capital collection and distribution, need to lend them money. If this credit dries up, the 3% is at risk.

What I don't understand is the inter-bank lending business. Who the hell cares if banks lend to each other. MOre inefficiency I say. If banks collapse cos they can't get money, let them. There is bound to be one super giant left behind to distribute the wealth.

So what the EuroGeeks have done is good I think. Take a trillion Euros and give it to the banks. Buy their shit, but force them to use the money to give to businesses. Cap bonuses (don't eliminate them).

In the US, the Fed has made the right noises and for once followed the more sensible and conservative EuroGeeks. As usual, W has the keys to the bank and no oversight. If anyone believes that Paulson (and whoever sits on the hot seat next) has any control on what happens to the money, I have a bridge I wanna sell them.

Anyway, this lending will give us a chance to protect the 3% growth. But thats not all. Economics is like a large spring-mass-damper system. You move it and the oscillations continue.

OK... so in order to buy the Shit and start the money flowing again, we need to pay up. Two options, Benny and Trichet print more money or they increase taxes. Inflation or reduced take home income. In the end you get less for your efforts. With an hour of work, you can't buy a shirt, but only a tie.

Printing money hits everyone the same and reaches a larger audience. Taxing can be designed to hit people who can afford it (or so one hopes).

SO lets assume that since this shit was caused by a few, the funds are raised with 70% taxes and 30% inflation.

So now, I have more taxes, and with what I have left, I can afford less. Demand falls. Businesses who now have money from the banks don't see demand and have to reduce capacity. Eventually business will suffer and shut down. Unemployment will increase and the death spiral will continue.

There is another lever though. The Fed can lower interest rates at a suitable time. If done right, consumers will be able to have easier access to money to buy stuff from businesses that they already bailed out. With these levers, the economy can remain afloat... and hope that as the shrewy pitbull said 'the innovation and the will of the American people' might pull the economy out of it...

So the people first pay to bail out the banks, then borrow money to buy stuff from businesses and keep them afloat, and then work their asses off to create additional value and growth.

Thats what should happen next.