We are all suddenly experts on the World economy; much has been written and said, but even the words of the experts don’t seem to get to the real heart and nub of the matter.

We know that thanks to cheap money, populist policies around the globe, but centred on the Anglo-Saxon World, credit has ballooned out of control over the previous decade, and that we now sit with a situation where debt is out of control at a personal level, at a Government/National level and significant further capital is required to be injected at a banking level.

We know that the long-term solution must be to wean this profligacy out of all these sectors and reduce debt levels. Yet we also know that every debtor requires a creditor, and given we are in a closed, albeit, global economy, the two must balance and why therefore are we now sitting with such a problem, and why is the situation causing such concern?

The reason is of course that liquidity is tightly held in a few pockets and is not being properly circulated back through the economy. It is rather being hoarded, partly because of the uncertain times, but also because some sectors of the economy are, believe it or not, so awash with cash they simply don’t know what to do with it.

We therefore need to identify which are these sectors, and having identified them work out how can we resolve the situation quickly, get the funds back into circulation, thereby increasing both the velocity of money-flow and the multiplier effect through the global economy and thus get the World back to work again. This should be the question taxing Government’s and economist’s minds.

The world’s leading economies (I assume this means the G20) have a tad belatedly begun work on a multi-trillion-euro package to save the Eurozone. The G20 finance chiefs, meeting in Washington, we are informed, started drawing up a plan to expand the European bailout fund in preparation for an apparently inevitable Greek default, likely to happen in a few weeks time.

This plan, shrouded in secrecy, subject to votes of support in many European countries, is intended to solve the three problems of vulnerable European banks balance sheets, particularly in France and recapitalise these, build up an existing €440 billion (£384 billion) bailout fund by a further €3 trillion and facilitate an orderly default of Greece, whilst simultaneously allowing this country to remain within the Eurozone.

A question that seems to be being glossed over is exactly where these funds are to come from, and who is going to bear the massive cost? And it is this aspect that gets to the heart of the way this issue is going to be voted on in Finland, Germany and elsewhere. Yet as much as it is being glossed over, it is the big question in the minds of all those who need to marsall national votes supporting it, particularly as many of the protagonists are up for re-election shortly. Put simply, how can a German politician be elected next year when he has doled out trillions of dollars to bail-out profligate Greeks?

As I have said, given that the problem is that we have at personal, Government and Bank levels accumulated too much debt, effectively borrowing from the future, where can we now be borrowing from to correct the problem of already too much borrowing? And is this not piling up an even bigger problem for the future? Where is this magic wishing well that some people, some Governments can apparently dip into at times of need, and if it truly exists, why did we have a problem in the first place?

Let us go back to first principles; every debtor requires a creditor, or to put it another way, if European banks, Governments and citizens are mired in too much debt, then there must be some extremely rich (and very worried because they might not get paid) counter parties. Who are these people, corporations or Governments? And when and why did we seemingly step over some invisible line and some invisible referee cry “enough!” or “Default!”

We know that the OPEC countries, particularly those in the Middle East, and the oil major companies themselves are sitting on vast cash mountains. Is the monopoly pricing of oil then a major part of the problem? Is after all not OPEC itself, in cosy partnership with the oil majors, the World’s most bullying oligopolistic arrangement? Is it right that “they”, unelected as far as I know, have the right to set oil prices at self-enriching levels that leave the rest of us in seeming penury? The money flows from oil transactions are some of the largest in the World, can it be that they are at the root of the present ills?

Economists at the IMF have argued that the impact on GDP is less than might be expected and that a 25% increase in oil prices will result in a GDP reduction in oil-importing countries of less than 0.5% spread over two to three years. Even if these numbers are true, and that stretches credulity, it does not take account of the significant change in cash-flows to the oil companies and OPEC countries already cash-rich and thus with a very low propensity to spend and consume.

These funds are effectively “bled” out of the global economy, exacerbating the already very serious debt bulge and liquidity crisis.

The World economy is a complex, dynamic, amorphous economic structure and it is easy to get lost and mired down in the minutiae, yet could it not be that by capping the oligopolistic pricing of the single commodity oil, much could be done to both get the World back to work, revive growth prospects and ensure that liquidity remains in those sectors of the economy where it can be most efficiently utilised?

Tags: #Eurozone