Guys, to fix a problem you need to understand causation.
Do you recall the figures produced by the BIS before the GFC in 2008.
It was something like
CDO's USD11 trillion
CDS's USD56 trillion
Derivatives USD1.3 quadrillion
These each comprise two elements, assets and liabilities.
The only problem is that the TBTF banks had learned to game the system. What is more, with the repeal of the Glass-Steagall Act, the US giants had the opportunity to do it using the leverage of everyone's savings.
Excessive government spending made the problem twice as bad.
Of the USD11 trillion of CDOs there was about USD 4 trillion that was never going to be repaid. That destabilised the CDS's in a way that could not be immediately understood. So counterparty risk shut down the interbank settlement systems. The USD4+ trillion is still there on the balances sheets of banks, the Fed, the ECB, BOE and numerous governments and government agencies.
So instead of jailing the bankers who gamed the system, the OECD governments rewarded them by changing accounting rules so they could continue to mask debt, by buying toxic assets off them and by providing bridging loans.
The only problem is that a proportionately similar number of rorts lay hidden within the derivatives market.
As a result, by my estimation the size of the problem was USD100+ trillion. This was reflected by bubbles in the strangest places caused by easy credit. Given global GDP was only USD61 trillion, the USD10+ trillion already wagered by governments to deal with the issue is just not enough to match collateral with debt.
To preserve the system using inflation we would need to triple the money supply (by all measures) at the very least.
Hence Bernanke is locked into QE3, 4, 5 etc. over the next five to fifteen years - depending on whether it is possible to reintroduce responsible government into the USA and split the TBTF banks by anti-trust legislation - or not.
The biggest problem is that in Germany the man in the street has learned their history well and hyperinflation is nothing that they want to have anything to do with - yet they don't want their banks to fail. So the ECB could fall off a cliff and the Eurozone and its currency collapse while German politicians dither.
I favour neither the inflationary route nor deflation. I would instigate the split of the TBTF banks, introduce benevolent dictatorship to the USA for five years and both increase taxes and reduce government spending to return the system to an equilibrium.
USA. Read my lips. Your democratic model has failed you and you are now locked into a series of dysfunctional governments. They have shown no accountability to the people in the key areas of economic management or the power to wage war.
If the economic crisis was the only problem things could be manageable. But that is not so. We are now entering an epoch where there will be competition for global resources. Remember the golden rule, "He who has the gold makes the rules".
That means that as peak oil approaches, many formerly rich OECD countries that are now laden with debt, will be unable to compete for resources with the emerging economies - unless they do so militarily. Already this is happening in Libya with China giving up and taking its 30,000 oil workers home.
We live in dangerous times. So Mr Obama, as the Aussies would say. "either piss or get off the pot". You must use your position to impose strong government.
Meantime the economists will continue to think this problem is all about them. It is not.