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"It is easy to predict the agenda of the Conference. A number of resolutions will be passed declaring that many things ought to be changed, but without a serious intention of changing them."

So JM Keynes on the eve of the London Conference of 1933.

I have said it and I will put it down in bullet points today. Unless there is a tangible, concrete outcome at the G20 there is the risk that the world economy moves from deep recession to slump. The today of a 1.7% shrinkage of global GDP surpasses the IMF's prediction two weeks ago of a 1% fall.

It does not sound much but if you consider the famous IMF dictum that anything less than 3% growth is a defacto world recession, then we are four percentage points into the mire. The problem is not the depth: it is the length. The World Bank report today warns that a weak recovery in 2010 could get swamped by a new wave of financial backwash. We need to remember, essentially, that in addition to the "toxic assets" banks also hold good assets that can turn bad overnight driven by unemployment, wage cuts, bankruptcies and trade collapse.

It's not my job to advocate specific policies, but clearly the range of policy tools to stop this happening include: fiscal stimulus, monetary easing - via zero interest rates and printing money, currency devaluation and state protection for industries and sector.

Every one of these responses poses point blank the issue of competition and protectionism. I will spell out the brutal logic for the polticians: if I splurge my taxes on saving the British car industry, then I want at least some of the money to go to Birmingham (or in Sarkozy's case, Billancourt) instead of Bratislava; I print billions of new pounds, then it's going to drive the value of my currency down and boost my short term export position; I intervene to drive my own currency down ditto; and if I create jobs in North West England I want at least some of them to go to UK nationals with votes here, not Polish people with votes in Poland (this latter, incidentally, is impossible to specify under EU law).

So the only way of avoiding rival bailouts is to co-ordinate the bailout strategies. That does not mean everybody adopting the same strategies, or ignoring the huge cost to future taxpayers that the most stricken economies (Britain and the United States) will leave as a legacy.

The G20 will not, it is clear, deliver everything. But how should we interpret the threat by President Sarkozy to walk out and refuse to sign the communique if there is "false success with language that sounds good but contains no commitments"? The same as we have to interpret Barack Obama's decision to "get tough" with a Detroit car industry whose workers idolise him and whose bosses expected him to bail them out.

The politicians are coming under pressure from the electorate to deliver tangible protection for their jobs, their taxes and their fiscal infrastructure. This is called democracy - and unless it can be mediated through some form of commonly agreed actions at a global level it will tear the world economy apart.

The world economy incidentally has a head start on the protectionists: global exports have slumped - by an average 40% annualised rate in the developed world. This is not caused by "protectionism": it is caused by the fragility of globalisation, which I interpret not as a "threat to globalisation" but a flaw within it. Multi-country supply chains and the end of vertical integration, both features of the last 20 years, have caused the export-supply economy to react like a tortoise in fear. Each economy has withdrawn to its shell once credit began to dry up.

I now looks like there will be some tangible outcomes: there will be a world regulatory body - the Financial Stability Forum will become the Financial Stability Board. But it will not have any teeth other than surveillance and cross-border co-ordination. There will be money for the IMF but in part that's because, to maintain the EU rule of no state bailouts, the EU countries are having to bailout Eastern Europe via the IMF rather than using the ECB. Fiscal Stimulus - there will be strong words but action is constrained. Monetary stimulus will be interesting - because there will be pressure for Europe to fall into line and adopt some form of unconventional monetary easing (printing money).

Will it stop 1.7% GDP shrinkage turning into a long stagnant decade? Nobody knows, for the simple reason that we've never had a global recession in the globalised economy. I cannot find anybody warning in advance for example: watch out, if global growth falls by 6 percentage points then global exports will collapse by 40%. There is massive potential for one or more countries to mess things up - for example America could transfer the cost of the crisis to China in a big dollar devaluation: this is why I am getting calls from serious global businesspeople insisting that, for example, China's demand for a new global reserve currency is not off-the-wall and needs to be listened to.

If the shadow of the 1933 conference - which failed for good reason - stands over the ExCel building this week, then the shadow of JM Keynes should loom over the proceedings and the protestors.

Gordon Brown laid out five tests for success at the summit. Keynes laid out just one:

"Our plan must be spectacular, so as to change the grey complexion of men's minds. It must apply to all countries and to all simultaneously."

Keynes warned the world's leaders against economic solutions that left out social and economic justice - for weak nations and poor people. He warned the world in 1919 not to impose harsh reparations on Germany; and he warned them in 1933 not to impose deflationary policies that would prolong depression. And he also warned the left, the predecessors of today's protesters: though sceptical of the Conference outcome he warned the readers of the New Statesman not to wish for the failure of the half-measures already enacted. You will not like what happens if it does fail, was the message. And they did not.

Of the delegates he said:

"Fear and greed, duplicity and incompetence, but above all conventional thought and feeling, have brought their collective performance far below the level of the participants regarded as human individuals. But here is a last opportunity. Finis Coronat opus."

Which I think means, in Latin, get your act together.

After yesterday's leak of the summit communique draft there was a lively discussion of the pros and cons of fiscal stimulus on Newsnight last night. Have a look on the iPlayer. I also ended up filming a series of links at the ExCel centre in docklands, which is a great reminder of what happens if you get economic policy wrong.

The Royal Victoria and Albert Docks, which form the placid waterway that will serve as a moat to keep anti-capitalists at bay, were once part of a maritime complex that was the centre of the economic world. Now as you will see if you go, they are a quiet backwater of waterside housing, conference centres and a few spectacular 1930s era abandoned warehouses related to the sugar industry just south of the site. Metaphors will be inspired, believe me.

Anyway I am not looking forward to covering the summit. I covered the November G20 - there will be thousands of journalists: imagine 3x TV channels, 5 newspapers and loads of specialists from each of 20 countries. Last time, in Washington, they put us all in a giant room in the State Department 2 miles from the summit to watch it on TV. But it was not on TV: a forest fire was on TV. The biggest waste of human effort was the result.

This time the UK authorities have deluged "civil society" with ways of participating. However what delights await once inside the cordon I can only guess at.

Because I can't guarantee to blog, I will also be twittering from my mobile phone. There will be a major flurry of news and reactions around the end of Thursday's proceedings. Will they save the world? Will Sarkozy walk out? Will the in-summit salad be as unhealthy as it was at the State Dept?

or follow the updates on my page.

And watch my film from last night's programme .

I'ts been galling to miss these grudge matches while I've been away in East Europe: Wales versus Ireland for the Grand Slam; Klitschko versus Gomez for the WBC title; and now Gordon versus Mervyn for the fiscal stimulus.

The Governor of the Bank of England landed a few rabbit punches at the Treasury Select Committee, saying basically that Britain should allow public spending to rise as planned, but no new fiscal stimulus - no Obama style roadbuilding and job creation schemes.

But now Mervyn King's fellow MPC member David Blanchflower has leapt over the ropes, tag team style. In a speech tonight he has said:

"any fiscal stimulus that is being planned should be concentrated on maintaining employment and sustaining labour demand, perhaps through expanding public sector employment, where appropriate."

Now Professor Blanchflower is known at the bank as "Danny" after the famous football player. It was Danny Blanchflower who famously said "we have to get our retaliation in first". And tonight he has (by the way his speech is also a tour de force critique of monetary policy and banking regulation).

Given that shadow chancellor George Osborne had already leapt into the arena in support of Mervyn King and his no-discretionary-fiscal-stimulus line, it's a bit of a barney.

The issue is not whether the key G20 countries - USA, Japan, China - should launch a massive fiscal stimulus: they will, though the EU thinks they shouldn't. The issue is whether Britain can afford to, or should do.

There are mounting arguments against: core inflation ticked up because the currency has slid so much; the currency will slide some more if the markets start to believe Britain's national debt is unsustainable. But the arguments in favour are also strong: the tax cuts announced so far will not create many jobs; fiscal stimulus is the sure fire way of ensuring bang for your bucks and demonstrating international solidarity when other, bigger countries are doing it.

The IMF has waded in with a recent report - showing the recession is in danger of becoming a slump and arguing that not only fiscal stimulus but fiscal stimulus targeted through public spending is a powerful weapon.

It will all be decided on 22 April in the Budget. As I've said here before, if the government does go for a further fiscal boost, it will place massive political pressure on them, because it busts completely the famous fiscal rules even more than they are already busted, and leaves the next generation paying for the bailout through higher taxes.

If it all sounds a bit little-endian versus big-endian, its not. Britain has already adopted a massively unconventional monetary policy - quantitative easing - and if it chooses not to go down the route of further fiscal pump priming, it is on QE, unheard of last October, that we are relying to get us out of this hole. It had better work.

In summary all the subcutaneous tensions that have had Labour ministers and advisers gnawing their elbows over Mervyn King have resurfaced. I think you can expect some fireworks if any of the players should make their way onto Newsnight tonight.

I'm writing this in Prague airport, on my way to Bratislava. I've seen a fair few East European airports on this trip and in their own way they tell the story of where this crisis is going.

Riga, Latvia: clean, decent retail/cafe choices. Very long unloading times: it felt like they had one guy back and forth. This is a shame because the Latvian airline AirBaltic is pretty good, and reports booming business off the back of a) everbody else's collapse and b) the move to a hub model, meaning you can go from London to Almaty via Riga.

Kiev Borispol, Ukraine: Aaargh. I mean Aaaaaaargh. The arrivals is swarming with taxi touts who would give their counterparts in Lagos, Nigeria a severe lesson in persistence. In fact, in comparison to Nigeria's much maligned airport (which has been reformed by handing it over to a private contractor) Kiev is really third world. Nobody could change me any sterling and nobody wanted to take local currency. This is a sure sign that your local currency is going down the tubes. In addition we had "carnet hell": a carnet is what news crews have to carry itemising every last lightbulb. Fellow journalists when I say the phrase "please wait here, it will all have to be typed out by hand" you may flinch now. Three hours later my producer emerged into the arrivals hall with a truckload of TV equipment and, oh, about a battallion size crowd of taxi drivers all too willing to help him.

Kiev, in general, is no joke. As you'll see tomorrow night, the country's on the brink of bankruptcy but the airport is a symbol of why rescuing it is going to be difficult. In my experience national airports that are a total shambles, with unrestrained touting are generally a symptom of a system of widespread graft and corruption. A senior businessman in Kiev has been painting grim off the record pictures of layer upon layer of graft.

Another sure sign of social malaise is large numbers of shaven headed men in black coats with radio earpieces. Such men are everywhere in Ukraine where there is wealth.

Prague: Having got here via Ukrainian 737 which seemed to have gaffer tape holding the cabin togther, Prague is its old self. It's just about to be privatised, which kind of sums up the Czech republic government's attitude to the credit crunch: fast forward to market solutions.

Somebody in their market zeal has decided there should be multiple branches of KFC, Pilsner Urquell pubs and dutyfree shops but no McDo or Burgerking so our team are a little mortified, not wanting to hit the Pilsner Urquell at breakfast time (I am surrounded by Czechs who have no such reticence).

Watch my Slovakia film here:

Anyway, the gist of all this is as follows: there is, as the departed Hungarian PM said this month, a danger of a new "iron curtain" in Europe; with the east divided between the saved and the damned. Czech and Slovak Republics look to be on the right side of the line - so its not just a Eurozone thing. Latvia is teetering between the two, despite its nice airport, and Ukraine more or less defines the problem of being unloved and unsaveable.

That's why I've found so many Ukrainian people I talked to determined to "survive on our own". They're heavily cynical about their polticians but they will duck and dive their way through. I can't see the taxi-driver numbers falling at Borispol any time soon.

I have been following the outrage over the AIG bonuses via the news channels on my tour of crisis-stricken Eastern Europe. Here in the Ukraine the situation is really perilous: the IMF's projected loan of $16bn is on hold until the country meets conditions. But these are becoming ever less stringent as it becomes clear the political situation is fragmented and the government cannot deliver.

However I can't help wondering what would happen if we substituted the words "BMW X5" for "AIG bonus". The West is, right now, via the IMF, preparing to bail out countries where a lot of people seem to drive top-of-the-range 4x4s; indeed, as the lead singer of a local ska band I have just interviewed put it, "there are more 4x4s here in this city than in most West European cities".

Its made me wonder what would happen if the IMF, as well as insisting on cutting wages and closing nurseries, simply ruled that all top-range 4x4 automobiles be banned in any country receiving a bailout. I think it might help concentrate the minds of the politicians and the business elite.

Watch my report from Ukraine below:

Amid the snow and concrete of Rumbula airfield in Latvia, there are still dotted the silhouettes of smashed-up Soviet-era aircraft bunkers. But it is not the wreckage of the communist system I have come to see. It's the wreckage of what replaced it.

Where the Tupolev bombers used to stand there are now parked, bumper to bumper, hundreds of brand new articulated trucks that have been seized from their owners by the banks.

"It feels a lot like the early nineties, just after the Russians went," says Kaspars Virsnitis.

His construction supply company was turning over 8 million Euros last year. Now it's gone bust and his premises have been commandeered as a makeshift lorry park. It was when that filled up that they had to start using the military runway.

"People are losing their jobs; buildings half-finished. We're back to square one."

His order book collapsed last October at the same time as most of the builders who owed him money went bust.

Why didn't you see it coming and plan for it, I ask?

He stands on one leg and pumps his other foot: "Last government. They just said: put foot on accelerator to floor".

Latvia grew faster than any of the boom economies of the Wild East. Last year its GDP was growing at over 10% per annum. This year it looks set to shrink by 14%. Public sector pay, having been cut by 15%, is to be cut by 20% more; 20% unemployment is a realistic figure by the end of the year.

When I ask the country's youthful new prime minister, Valdis Dombrovskis, when he expects the economy to begin growing once again he says, quietly: "Right now we don't talk about that".

Latvia, in short, is at the beginning of a slump. And the tempo of a slump is slow: explosive start gives way to slow onset and slow recovery.

We have to hope that the rest of the world can avoid one, but it is still not certain. The psychological impact on the post-soviet generation here, that has known only the upside of capitalism, can only be guessed at.

Watch my report on the Latvian economic collapse below:

So why does my tour of eastern European economies matter? Well, the crisis here could pull much of the West European banking system down with it. And economic sovereignty is draining away from places like this. Their fate will be decided in the IMF offices in Washington, not the soviet-era chancelleries.

Last night's decision by the US Federal Reserve signals a decisive end to the delay and denial that has characterised monetary authorities' response to the economic crisis. The FT is calling it "shock and awe"; to me it looks more like the beginning of the Malcolm X phase of the crisis. Malcolm famously told black America to defend itself "".

Just let me recap. As early as two weeks after the Lehman collapse, bond traders and economists in the City of London began telling me that there would have to be wholesale nationalisation of the banks and the large scale printing of money to stop this crisis. They badgered me, educating me in the process about the intricacies of quantitative easing. Some were Great Depression experts, some had been bloodied in Japan's lost decade. As a result I, among other journalists, began to raise the possibility that QE would have to be done.

To achieve QE you first of all have to cut interest rates to zero or near zero. This was achieved in the USA on 16 December and in the UK only on 5 March (the ECB is still way behind and I will come to that later). But in the USA, having created a platform for QE, Ben Bernanke shied away from it. Not for the first time in this crisis he proposed a seemingly elegant, complex and nuanced solution in its stead.

The Fed, he announced, would do "credit easing". Printing money in order to buy up the distressed assets of the banks, rather than - as the QE textbook says - to buy up government debt. He flew to London to make a heavily promoted dissing QE as the solution to this crisis. Economists began to doubt publicly whether Bernanke had understood the role of QE in alliviating the depression. One phoned me to point out that "in Bernanke's book on the Depression there is nothing under Q in the index".

The crucial difference with the Fed, said Bernanke then, was that it would not set a target for the amount of money to print, but concentrate on buying up the type of loans that would bring down the spread (ie the difference) between Federal borrowing, bank borrowing and company borrowing. Its initial plan was to spend $500bn in those famous "mortgage backed securities" and another $100bn on debt from Fannie & Freddie.

Last night's announcement, dramatically changes the game. In addition to another $750bn in MBS the Fed will now buy $300bn of long term government debt. Whether set as a target or no, the Fed's money printing operation now extends to $1.75 trillion - double the amount committed to the Obama fiscal stimulus. And it is not being done to have a subtle effect but a massive one.

In January just one member of the Fed voted for this form of "classic" quantitiative easing and was opposed by the rest. Last night's reversal of position was unanimous. The Fed also dropped language indicating "some financial markets have improved". The move, according to Barclays economists, is the equivalent of cutting 0.75% off interest rates, and leaves the government underwriting half the mortgage market and a third of the market for government debt.

The move is not only a victory for the "monetarist Keynesians" in economics who point out that only the move to QE put a floor under the collapse phase of the Great Depression in 1932 - it is something of a moral victory for the Bank of England. Having initially poo-poohed QE itself (and taken an age to get rates down to 0.5%) the Bank reportedly began to study textbooks and consult pro-QE economists in December.

Many saw Bernanke's LSE speech as an attempt to dissuade global monetary authorities from adopting the classic policy. If so the Bank of England ignored it, clearly under the impetus of the political will of the Treasury and Gordon Brown, who in my experience were never dogmatic about QE, simply cautious.

If (and it's a big if) Tim Geithner's new plan for a decisive cauterisation of bank losses proves convincing (it could be published as early as today), then both sides of the Atlantic we have a new narrative about the survival plan. And a very different policy from the one cobbled together in October.

But amid the relief it is worth noting that this could have been done earlier and it now leaves the ECB as the global naysayer. We already know the EU governments dislike the fiscal stimuli enacted by America, China, Japan and Brazil; the ECB has been much slower to cut interest rates and of course cannot itself "do" Quantitative Easing without the collaboration of national central banks.

There are of course respected economists who think QE is a disaster, who believe it will stoke up inflation, and that it probably won't work. They may be right.

But this was not the objection of those in power who resisted doing it. With hindsight their objections look like caution and an under-estimation of the seriousness of the problem. Now, with Mervyn King urging the G7 governments to take "any stake necessary" (code for "nationalise if you have to") the Malcolm X doctrine is taking hold.

Some have seen the US U-turn as the product of fear: "do they know something about the banks we don't?", ask market traders.

I see it as a victory for politics over the monetary policy elite. I am pretty sure Brown and Darling (and Treasury top civil servant Nicholas McPherson) were behind Britain's move to QE. I am also pretty sure Brown raised it with Obama on his trip to Washington, at a working lunch involving Lady Vadera and Second Permanent Secretary Jon Cunliffe. How it got from there to last night's stunning policy u-turn we probably have to wait for the history books to find out.

(PS. I am still in Riga, Latvia. More later on the situation here).

Riga, Latvia - While my colleagues are having fun trying to dechipher to overhaul banking regulation I am in Riga, the capital city of Latvia, to find out what it feels like when a country hovers on the brink of bankruptcy. Weird, is my first impression.

The coffee bars are still open, though Riga has, like many British cities, its fair share of closed shops with 'To Let' signs. Whole swathes of industry have gone bust - though I use the word industry with caution: Latvia bought the whole Anglo-Saxon capitalist dream - service industries instead of manufacturing; the perpetual escalator of rising house prices.

Because it was a recently 'de-Sovietised' economy there seems to have been a fair amount of informality as well. When, for example, they finally passed a law saying you had to prove your income (that old thing, a pay cheque!) before getting a mortgage it tanked the housing market badly because, er, some people seem to have been content with an "official" pay cheque at the minimum wage for tax purposes and the rest in cash.

The government here recently fell after the finance minister appeared on Bloomberg TV. Asked what was going on with the Latvian economy, he replied "nothing special". That phrase has come back to haunt the political elite here, because what is actually going on is a slump.

Last year Latvia's GDP was growing at above 10%. This year it is set to fall by at least 5%. But that's the official figure and it's old. The prime minister - who's - just told me that he now thinks it will shrink by 12%. He plans to cut public sector wages by 20% - after his predecessor already had to cut them by 15%.

The country now stands between the prospect of prolonged deflation and bankruptcy. A tough choice for any politician you may think, but in fact Latvia's economic sovereignty has already drained away. Watch on Monday 23 March for the start of my lightning tour of Eastern Europe, to find out how ordinary Latvians are surviving the slump - and why it matters to the rest. (I will give you a clue: if East Europe goes bankrupt it will drag west European banks with it). Cheerio.

Obama's interevention into the G20 warm-up process last night carried an unmistakeable message. The twin goals of the summit are to be bank regulation reform and fiscal stimulus. This, diplomatically, is both a sop to the European obsession with reining-in Wall Street and a frank re-assertion of his central strategy: Obama wants to reflate the world economy with borrowing, public spending and tax cuts. In this he has support from China, the IMF's bosses and some of the newly powerful middle-income countries. But the Europeans are lukewarm on fiscal stimulus.

[Before I go on let's define fiscal stimulus: you add demand to the economy by boosting public spending and/or cutting taxes, at the price of increased government borrowing.]

A of the fiscal stimuli (announced but mainly not enacted) makes fascinating reading (here is a if you can stomach an .xls this early in the day).

Countries have committed $2.75 trillion so far, with the biggest spenders being the "G2" - the USA and China - closely followed by Japan (500bn) and Brazil (283bn). On top of that the IMF has committed $65bn to Pakistan, Latvia, Iceland, Hungary and Ukraine - a figure which though small represents a staggering 20% of these countries combined GDP. In Europe meanwhile the stimuli announced are small: neither Britain, Germany, Italy or France will spend much more than 1.5% of GDP.

The problem is in this crisis: all measures that are not taken multilaterally end up shifting the problem somewhere else. The suit jackets of the politicians may be going shiny with breast beating against protectionism, but a unilateral fiscal stimulus is a kind of protectionism - even if you do not overtly tie the spending into your own country (and Hu, Obama and Sarkozy have already done so). This is why Obama is just as correct to call for a global fiscal stimulus as Gordon Brown is to call for a global framework for bank regulation.

However calling for global action is one thing, delivering it another. And the reason for this goes beyond venality and nationalism. There is an unaddressed problem at the very heart of globalisation. In a trenchant the Daily Telegraph spells it out:

"We are in this mess because enormous global trading imbalances were allowed to build, by governments and regulators who were asleep at the wheel."

In his book, , the FT commentator Martin Wolf outlines a sophisticated critique of the global imbalances, which I will summarise (as always risking the charge of over-simplification): China produces, the west consumes; Asian people save, Anglo-Saxon people borrow and spend; Western governments are in debt, while Asia, Russia and the oil producing countries have run up surpluses; finally (and shockingly) the flow of investment from the west to the east is dwarfed by the flow of investment from developing countries to rich countries, with the added problem that Western investment in the East is highly profitable, but not the other way around.

Before this crisis developed economists and politicians used to sit around pontificating about how these imbalances would be redressed. Now we know: through a cataclysm. The question is, will it be a primarily objective process, in which the individual actions of states in pursuit of their economic interest leads, eventually, to a new economic order - or will the most powerful governments in the world keep a handle on the process.

Here again I must point you to today's Telegraph: its Edmund Conway thinks not:

" It is going too far to say this is one of the final opportunities to save the world economy from sliding over the brink. The descent in the Thirties was far more gradual and intangible. But at some point the politicians must do something to arrest the economic collapse, or cave in to its inevitability. Instead what we will get is another summit full of sound and fury; another no-business meeting."

There is a conclusion lurking behind the re-emergence of the global imbalances into the G20 debate that not many people are prepared to draw. I will spell it out: globalisation has not really been globalisation at all.

Far from the emergence of a harmonised and increasingly unified world economy it has produced a lopsided and malformed structure that is now falling apart. The low paid worker in Detroit cannot buy his new pair of trainers unless the low paid worker in Shenzhen a) makes them, b) deposits four out of ten yuan he earns in the factory into a global finance system that then c) lends the money to the Detroit trainer-buyer at virtually zero interest.

And when I say falling apart I do not mean primarily protectionism - though there is protectionism. I mean that the cheap-money finance system was the glue that held globalisation together: it was made possible by the high savings of Asian farmers, workers and salariat - savings, by the way, that attract unsustainably low rates of return. The debt driven finance system, together with much of the rest of the economic model of the last 20 years, is what has fallen apart.

Those who study the imbalances are pretty much agreed on what the technical solution is: China and India must become modern consumer-driven economies and the value of the dollar must fall. Instead of saving, Chinese and Japanese consumers have to spend. This solution is often explained as if countries were - as they are in Sid Meier's - represented by a single player, an all powerful government advised by wise economic men. But it is otherwise in the real world. Countries are made up of classes. And the rebalancing solution actually means a major redistribution of wealth in China, India and much of the global south away from the rich and towards the workforce.

The question is, does anybody have the vision and capacity to deliver an orderly rebalancing of the world economy? It is easy in the run up to the G20, with many western politicians drained of credibility, to predict they will not, and that the summit will be a talking shop. However history does provide us with examples of summitry that worked: Bretton Woods worked; the Versailles Peace Conference - though it came up with a disastrous solution in the form of unpayable German reparations - actually worked as a summit. There was haggling, reasoning, all the great minds were there, compromise was reached, synthesis achieved and then imposed.

And it's clear why: both summits took place directly after global conflicts. It was absolutely clear in 1944 and 1919 what the power pecking order was - and to the effect that certain nations did not understand this (eg France in 1919) they got royally carved up. Likewise at both conferences you had superpowers that were globally engaged, above all America. And you had leaders with vision: men (it was mainly men) who had actually led masses of people through difficult situations and who used eminent economists such as JM Keynes for advice but then took their own decisions (in the case of 1919 ignoring the advice).

Today the global pecking order is disrupted. America is still the tops but China has a growing confidence (Chinese submarines last weekend in a "Hunt for Red October" style standoff with a US navy ship off the Paracel Islands).

Crucially the prestige of America's global ideology and economic model has been dented. Finally there are very few global leaders who talk in terms of an over-arching vision: China's politicians do not have a "global" strategy yet, in the same way that pre-1916 US presidents also shrank from global ambition. The one politician with momentum - Barack Obama - does not even have a fully formed administration.

So the question of the G20 summit is not whether the communiqué is waffle or contains concrete commitments: the in November contained a concrete commitment, nay instruction:

"We shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO's Doha Development Agenda with an ambitious and balanced outcome. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly, as necessary."

Suffice to say there is no Doha deal.

No, the question for the G20 summit is whether anybody actually outlines a vision for a rebalanced global economy and path to achieving it. Well Stephen Roach, Morgan Stanley's MD in Asia, is one of those closest to the question and has been one of the most perceptive commentators. I will leave the last word to him, (courtesy of yesterday's ):

"A crisis-torn world is in no mood for the heavy lifting of global rebalancing. Policies are being framed with an aim towards recreating the boom. Washington wants to get credit flowing again to indebted US consumers. And exporters - especially in Asia - would like nothing better than a renewal of demand led by the world's biggest consumer. It is a recipe for disaster."

So today the Bank of England starts using the money it has effectively printed to start buying up government debt. Will it work? In actual fact quantitative easing has already begun to work: the interest rate on a ten year IOU from the government (known as a "10-year gilt") has - the lowest it's been for 40 years. It was just above 4% a couple of weeks ago.

When it was first tried out in America, on the advice of JM Keynes, QE worked within a month, and that was when buyers and sellers of government debt had to physically collect the paperwork. Gilt yields (aka interest rates) fell; the stock market bottomed. So if today's action continues to depress yields this is one of the first, tangible, positive signs that government policy is working.

The theory is that by driving interest rates on government debt down, this will drag down the cost of borrowing for companies - which at the risky end of the market has rocketed to 31%. But here's where the uncertainty creeps in.

Today, for example, Wrekin Construction - a business with £50m of orders reportedly on its books - went into administration. It told the press that RBS had refused to extend an overdraft: it needed £3m. Now 600 civil engineering and railway construction jobs are at risk - and we're supposed to be in the middle of a government-driven civil engineering boom.

This raises obvious questions about another part of the government's rescue policy, namely the bank bailouts: we'll come to that in a minute. But for now consider the risk events like this pose to the policy of QE. Construction firms can default on their debts: governments rarely do. So the risk of default has to be factored into the price of company borrowing. The danger is, as the economy worsens, this high risk of default keeps the cost of company borrowing high while the government's interest rates come down. This will defeat the purpose of quantitative easing.

For it to work it has to be joined up with other policies. Yet the central policy - the bank bailout plan - has a major question mark over it. It is one thing to expose the taxpayer to £625bn of potential bad debt. But to refuse at the same time to seize control of the banks is seen by many in the finance sector as inconsistent. It is not a question of nationalisation or otherwise: there is an obvious touchiness among Labour politicians about being seen to nationalise the banks. It is a question of control.

Publicly listed companies are run by managers for the benefit of shareholders. If shareholders dont like what managers are doing they get rid of them. Thus, in theory, the shareholders "control" the bank. As we know they did this badly, losing most of their own money in the process. If the government is the major shareholder - with 90% of RBS and 65% of HBOS - why does it not begin to exert control? The private sector shareholders exercised this function badly and now, reduced to a rump, are in no position to do so properly at all.

The government's opposition to nationalisation is always stated thus: "We have no desire to control a major bank; that's best done by the private sector". And the remit of UK Financial Investments, which holds the taxpayer shares, has been written to make this clear: they are to act purely as a commercial shareholder, one suspects - reading between the lines - the type of shareholder who turns up to the AGM, asks a few questions, and goes away for another year.

However real shareholding institutions exercise close and continuous supervision over major listed companies: their analysts are in and out of the finance department; they are actively engaged with the board. It is a legitimate question: if the major shareholder is not doing this, who is?

And here's why it matters. The government could have ordered RBS to bail out Wrekin Construction. It could even have bought some of Wrekin's debt on its own account, bypassing the banks completely, using the Bank of England's new powers. Quite simply, leaving all the ideological considerations aside, there is the danger that the refusal to actively manage the state-owned banks - relying instead on "agreements" to boost total lending in general and on normal commercial terms - starts to undermine the impact of quantitative easing.

If banks don't start pro-actively pumping money into companies that, on normal commerical terms, would not get the money, then the whole point of QE is lost.

One city bond trader last week suggested to me that the government could simply take operational control of the "fixed income" (ie bond) departments inside RBS and Lloyds and place, say, £50bn of the newly printed money at their disposal. He, like many in the City, was totally unsentimental about nationalising the banks. If you are stunned by that, don't be: high finance in a crisis is a game without a playbook. Only highly creative and audacious moves, which prompt people to say "I didn't know you could do that!" have a chance of putting things right.

And we are not talking here about some arcane side issue: Quantitative Easing and the nationalisation of bad banking debt are the last throw of the dice. They're both designed to pump spending power into the economy. They have to work - because the global economy is declining much faster and much further than anyone expected.

Two days ago IMF boss Dominique Strauss-Kahn labelled this the "Great Recession": the worst of our lifetimes. The IMF predicts world GDP growth will now shink to zero. In January the Fund's economists ran an modelling exercise showing Japan at high risk of deflation, closely followed by the USA, Taiwan, most of Europe and most of South East Asia at medium risk. Veteran UBS economist George Magnus warns that we are on the cusp of a deflationary spiral and even a depression, and that "even unorthodox monetary and fiscal policies" may not be enough to save us given the deep structural indebtedness of households, and the essentially bust situation of the banks.

This brings us to the third lever: fiscal stimulus. You will hear a lot in the run up to the G20 about "co-ordinated fiscal stimulus". Fiscal stimulus means cutting taxes or spending more taxpayers money to stimulate the economy. In Britain we've had one fiscal stimulus, in the form of the £12bn VAT cut, with a few billion more of public projects brought forward. The IMF poo-poohed this at the time but some close to government believe, though small, it is working: that we've had £12bn worth of bang for our bucks, pro-rata.

The point in the UK however is that there is very little room for a further fiscal stimulus. The government had to breach its own 40% ceiling, taking predicted debt towards 60% of GDP without factoring in what happens if much of that £600bn we have absorbed from RBS and Lloyds/HBOS goes bad. To launch a further fiscal stimulus in next month's budget would mean increasing the structural debt of the British government to unimagined levels.

There are two alternatives: one, would involve injecting a further £90bn, Obama style, to create about 750,000 jobs. This would dwarf the fiscal stimulus of November and necessitate a rapid rewrite of the debt projections. Given this would saddle the next government - nay the next generation - with a massive tax burden, ripping up the present pattern of public spending for several decades, I cannot see how it can be done without either a) bipartisan support b) an early election.

The second alternative is to renounce fiscal stimulus and soldier on with the bank bailout plus quantitative easing. Until we hear otherwise we have to assume that's the default option. Which makes it vital that the policies - once opted for - are executed boldly, assertively and decisively. Hit the comments button as always.

Barring a last minute attack of caution, it looks like the Bank of England will move today out of the realm of interest rate cutting and into a strategy known as Quantitative Easing. Having spectactularly failed to predict the credit crunch, I can at least claim to have predicted this, for in early October I said on Newsnight: "If the bank bailout does not work the only thing left is to cut taxes and print money". And so it has come to pass (though more on taxes below).

The essential point about QE is that the bank invents new money and uses it to flood the banking system with cash: it's a bit like putting a power hose down a blocked drain. Eventually the water pressure moves the blockage.

Since the US central bank began doing this in December, it has chosen not to do the classic QE tactic, followed by Japan earlier this decade, of buying up the debt of government. Instead it has bought mainly bank and company debt, rather than government debt. Ben Bernanke outlined the reasons in his at the LSE. Japan concentrated on boosting the central bank's lending by a simple number. The US approach concentrates on the quality and type of the assets bought by the central bank, because the theory is that this stimulates lending, and then demand quicker - and of course because today's crisis is much worse than the one Japan faced.

If, as briefed, the Bank of England decides to boost the money supply by an overt number, it looks like the British approach will turn out to be a hybrid of the US and Japanese models. The problem with the US approach is, if you try to avoid buying too much government debt, and concentrate instead on buying up the debts of companies, it is still possible that size of government debt being run up to fund the budget deficit "crowds out" borrowing in the private sector.

We'll see, in the final design, what the Bank of England thinks it is trying to do. But the bigger picture is this. Today the fiction that the Bank "controls" monetary policy is laid to rest. In fact politicians always ultimately control monetary policy, they just have a tendency to like saying its none of their business. Now, however it is their business. Senior ministers made clear to me in December that, should Britain go for QE, it would be a government decision.

Incidentally classic QE requires the Bank of England to state for how long interest rates will be held at 0.5% or close to zero - either in time or according to some criterion about the return of growth and inflation.

What we are seeing today is, some would say "at last", decisive action. Once the HBOS loan book is insured by the taxpayer we will have the beginnings of a coherent story about how to staunch the financial crisis and combat the recession. Many of the governent's critics, especially among city economists, believe this could have been done months ago.

But, of course, it's not the end. The emerging consensus among economists, very amply demonstrated by this in the run up to the G20 summit, is that we need zero rates, QE plus a giant fiscal stimulus across the world, with decisive bank nationalisations, part-nationalisations and state-owned "debt dustbins" created wherever there is still distress.

The UK still has not launched a blockbusting fiscal stimulus (the £12bn in the Pre-Budget Report, through the VAT cut, is puny compared to the stimuli unleashed in the USA and China). It's easy to see what you could spend the money on: building tens of thousands of new homes, greening the existing housing stock; completing the poor transport infrastructure etc. But since we are already on track to be over £1 trillion in debt by the mid-2010s, and that is without taking into account our £600bn exposure to the debts of HBOS and RBS, any further fiscal stimulus on the scale announced by Obama and Wen Jia Bao would really have to have some kind of electoral mandate behind it, especially as there is a conservative version of the fiscal stimulus (as evidenced in the USA) which says that you concentrate on tax cuts rather than spending hikes.

Thus today is significant not only for students of the history of the Bank of England. It marks the start of the transition into a pre-electoral political cycle. Once we've had the budget we will be in it for certain.

The overhanging question remains: will the bailouts and the QE and the interest rate cuts actually work?

Well it depends what you mean by work. In Japan the QE and zero interest rate strategy did manage to prevent deflationary spiral and a 30s style Depression. In Sweden banking nationalisations "worked" because we were at the start of an upturn.

I still believe the global nature of the crisis, the number of financial unexploded bombs in the system, the potential for disintegration of the world economy into blocs pursuing rival bailout strategies, the rapidity of the onset of recession - all this has the potential to prevent the medicine working.

And when it does work? Well we'll be in a highly state-ised economy, with government holding everything from stakes in car companies, train operating companies, builders; a massively expanded public sector and hopefully a better developed green tech sector; and a lot more public and social housing. Capitalism will look very different and the political choices this generation had the luxury of making will not be on offer to the next generation. That, if it sounds dystopian, is the "best case" scenario I can realistically think of.