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Statistics have never looked so grim for the developed economies. The industrial output of Germany and Japan is dropping at unbelievable speed, as foreign demand is vanishing. The same trend is visible in the Eastern European economies, too. Unbelievable facts simply reach beyond imagination when we look at industrial order intakes, which give us the economic outlook for the next few months. Data from the German Ministry of Economy show that factory orders plunged 25.1% in December 2008 compared to December 2007, according to Bloomberg. Cause for even greater concern comes from the collapse of orders for capital goods (-30.4%), which are the engine of future development. Such collapse could be the preview to massive restructuring of some economic sectors, at least in Europe. If a 30% collapse is impressive, what can we say about a 50% drop in EuroZone orders for capital goods made in Germany?

Under these circumstances, we should not be surprised that German economists speak more and more about a new economic depression, as FT Deutschland wrote. The International Monetary Fund, too, has started talking about a depression, according to a Bloomberg article. During a conference in Kuala Lumpur, IMF President Dominique Strauss-Kahn stated that the advanced economies were already in depression and that the crisis was going to worsen, unless the banking system stabilized soon. If the IMF did not see the recession before it hit them dead-on, how credible are the policies they propose to emergent economies as conditions for disbursing financial aid?

Confidence will not return to the financial system until the fiscal and monetary authorities do not give up for good on the decision to eliminate the practice of marking banking assets to the market. The acquisition by the U.S. Federal Reserve of 30 billion USD worth of assets from Bear Stearns is proof of that. At the end of last year, the Federal Reserve reported to Congress that they did not expect "any net loss to the Federal Reserve or taxpayers," according to Bloomberg. The mark-to-market recently revealed losses in excess of 4 billion USD, of which 1 billion USD from J.P. Morgan, which took over Bear Stearns in May 2008. Inefficiency will also be the keyword of the new plan of the U.S. Treasury, unless the mark-to-market does not become a mandatory condition for receiving any funding.

The world is expecting wonders to come out of the U.S. economy stimulus plan proposed by President Obama. Unfortunately, the world"s largest economy is beyond the point where it can be rescued through marvelous solutions devised by politicians. Some of them, such as Senator James Inhofe (Rep.) of Oklahoma, are able to see what really is behind the "stimulus." "The bill is 93% spending and only 7% stimulation," Sen. Inhofe wrote on his website, upon announcing his negative vote on the matter. Nevertheless, President Obama has significantly increased the pressure put on the legislators to pass his fiscal plan while speaking of a "national catastrophe" as the final argument to sway the undecided on his side. The road from promoting "hope" (i.e. the keyword of his inaugural speech) to promoting "fear" has been very short for Barack Obama.

This course of action can only reinforce the concerns of Professor Willem Buiter, formerly a Member of the Monetary Policy Committee of the Bank of England. On his blog hosted by the Financial Times, Buiter has again warned about "deficit-financed fiscal stimuli in countries whose governments have weak fiscal credibility." If these governments cannot guarantee a spending cut after the crisis is over, how are they going to pay the debts piled up until such moment? The answer is simple and the governmental bonds markets are more and more alert to the inflationist threat looming in the near future. Professor Buiter believes that the United States and the United Kingdom are now "submerging markets," perhaps as a result of the authorities" desperate actions, too. Economic realities has made them irrelevant, and this cannot be accepted by the promoters of the universal good.

The fiscal credibility of the United States has also been addressed by Paul Keating, a former Minister of Finance and Prime Minister of Australia, who was interviewed by the public television of his country. Keating stated that the debt generated by the bonds issued to finance the rescue plan was too great to be paid back at its real value, so the dollar would be intentionally depreciated by turning on the money printer.

The depreciation of national currencies has become a painful trend in Eastern Europe and the former Soviet republics. The central banks do not seem to have discovered its cause. Their direct intervention to support the exchange rate is not even a very short term solution anymore. The remark of Grigory Marchenko, President of the Central Bank of Kazakhstan, is a perfect reflection of the central bank"s attitude towards the currencies they manage: ""We have reached a new market equilibrium level and we will defend it." The statement was made after the Kazakh Central Bank had just announced an 18% depreciation of the local currency, following a dramatic collapse of the foreign exchange reserve, the Financial Times reported. If the equilibrium has been reached, why is there a need to defend it?

During a press conference called to unveil the latest inflation report, the governor of the National Bank of Romania reminded us that recessions could be represented by various shapes, depending on the speed at which growth was resumed. He took the opportunity to exclude the L-shaped recession. (i.e. Mugur Isarescu actually said: "This is a V-shaped recession, but we have no information about the U-shaped one, which entails a longer period of economic decline. The worst form is the depression, which is L-shaped. It means that the economy goes down and stays down."). Where does the National Bank get its optimism? From their own macro-economic models, which did not "predict" the sudden full-stop of the national economy in the last quarter of 2008?

The L-shaped version is exactly the most probable one, as the Government is determined to maintain a profoundly imbalanced economic structure, which is now collapsing in the EuroZone, too. Spending will remain inconsequential, while debt will remain intact and without any financing source. The speech delivered in Davos by Premier Vladimir Putin tells us that the time when only "light" and natural gas used to come from the East is long gone: "In the 20th century, the Soviet Union made the state"s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated."

Can anything be compared to the bitter irony of History?