Krugman's views are marred by contradictions at best. On the one hand, he jumps to the conclusion that the global economy will recover eventually. On the other hand, he is not quite sure how the global economy will mend itself after this systemic breakdown.

"How do we get out? I think the technical answer is God knows. We have a great shortage of role models," said Krugman, a professor of economics at Princeton University in the United States.

He does not get it.

In the past, swift economic recoveries saw affected countries export their way out of trouble, trading with countries with large surpluses. "Unless we can find another planet to export to, we cannot have an export-led recovery from this global financial crisis, which means we have a serious difficulty," he said.

Like most economists, Krugman can't get out of the hole into which he has dug himself. He somehow believes that the global economy will return to its growth path, similar to what happened over the past few decades: The exporting nations, armed with excess production capacity, will continue to produce manufactured goods for global consumers. This excess production and excess consumption will continue forever, or so it seems, so that planet earth will experience joy and prosperity. Krugman and the world's economists believe in the sustainability of global capitalism and global financial capitalism even though they are teetering on the edge of a cliff.

Krugman is right when he says we will need consumers from Mars to purchase all the manufactured goods from planet earth, to help the export-led countries recover from the crisis. But since there are no consumers from Mars that we know of, we have to live with the indebted consumers on earth, who no longer have the purchasing power to acquire all the excess manufactured goods. Global industrialisation has arrived at a dead end. All the abuses in the global financial system, in which banks and institutions and corporations issue debts and paper money that flood the market, have accelerated its demise.

Technology and investment have gone into factories and plants to the extent that they can turn out more manufactured goods than global consumers need. Yet they continue to produce. Secondly, industrial production and distribution and the services that are tied to them are linked to the financial system. Producers have to seek financing and rollover their debt. They survive if they can sell their manufactured goods and receive the income to pay both the interest and principal they owe to the banks. Whenever this brief rollover is interrupted, they go bankrupt.

Now we are witnessing an interruption in the world's largest consumer market - the United States - that is putting global industrial production at risk of a breakdown. Consumers from other parts of the world can't make money fast enough or in amounts large enough to consume all the goods from the global industrial capacity. A collapse in demand will hit the global industrial production and financial systems in one fell swoop.

Krugman brought his audience to a comfort zone. He said that to find anything comparable to our current woes, economists have to look back to the 1930s, when the world slump was brought to an end "by a very large set of public works programmes known as World War II. Demand created by World War II helped lift the global economy out of the depression".

In this respect, Krugman is playing with fire, though he admitted that it was a joke. "Hopefully we're not going to repeat that strategy," he said, adding that policy-makers could try more stimulus programmes, higher inflation targets and spurring business investment. "We don't know which of these things will work, so we need to try all of them," he said.

But how can governments come up with further stimulus programmes when they are already saddled with debts amid growing business bankruptcies? Excess production and excess consumption have reached a point where we actually need radical restructuring so that we can get back to our original shape.

We can't continue to produce and consume excessively, buoyed by paper wealth that does not correspond to the fundamentals. Sadly, no economist can admit this reality, including the policy-makers, who are all tempted to introduce stimulus programmes for short-term gain.

The only way out of this crisis is to undertake restructuring in a painful way. We might witness a New Economy emerging. The old global capitalism is dead, for good.

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