G20: Sticking plaster not cure
On the Ten O' Clock News last night, I said there's unlikely to be a return to business as usual in the global economy unless and until there's confidence that the banking system has been fixed and reformed.
Which is the respectable reason for the shows of passion by some G20 members - especially France - for the London conference to signify that the riskier elements of the Anglo-American, financial-markets model are dead and buried.
But as Mervyn King, the Governor of the Bank of England, has pointed out, governments can afford to take their time over the detail of reconstructing the banking system and reining in the activities of less-regulated firms, such as hedge funds.
Well, with very few exceptions, most financial firms have been so battered and chastened by the collapse in the value of their loans and other assets over the past 20 months that there is not the faintest possibility that they're going to start taking stupid risks again for months, probably years.
In fact, the problem for the global economy right now is not that banks are taking too many financial risks, but that they're taking too few: what has precipitated the worst global economic downturn since the 1930s is that the flow of credit has become an inadequate trickle, because banks and other financial institutions lack both the resources and the confidence to lend.
Arguably the return of confidence to banks and in banks - and the return of the ability to invest for the long term by business in general - requires rather more fundamental reform of the global financial system and of the global economy than what's at the heart of the G20's agenda for the next couple of days.
The big point for me is that many of the business leaders and bankers to whom I talk have little ability to forecast business conditions beyond the end of their noses.
And the reason is that what they see from government heads is quick fixes to our economic woes rather structural reform.
Take, for example, national governments' attempts to sanitise their respective banking systems, their various initiatives to protect banks from future losses on the reckless investments and loans the banks made in the bubble years.
Whether these take the form of the insurance provided by the Treasury to Royal Bank of Scotland and Lloyds TSB or the state-funded purchase of bad assets that's been launched in the US, they all represent a transfer from the private sector to the public sector of the weakest portions of banks' inflated balance sheets.
That would be fine and dandy, if the public-sector balance sheets of the US and the UK - for example - were rock solid.
However that's not the case.
The collapse of the financial services industry, which triggered a general recession, has led to massive increases in public-sector borrowing in both countries.
And this huge public-sector deficit sits unprettily alongside the massive debts of banks, households and companies: the aggregate public and private indebtedness in the UK and the US, including the financial sector, is equivalent to an unsustainable and eye-watering 400% of GDP (give or take the odd few hundred billion pounds).
Which is another way of saying that each initiative for rescuing the banking sector - or for stimulating consumer spending, or for propping up an ailing motor manufacturer - is conspicuously solving one problem by creating another long-term problem: debt that needs to be repaid.
Because in the heavily indebted economies, we're robbing Peter to pay Paul, it's extremely difficult for any business to invest on the basis that there'll be a sustainable economic recovery any time soon.
Instead they feel obliged to keep costs as low as possible, protect as much employment as they can, but put any ambitions for expansion on ice.
Which means that they limp along - and, as a dire consequence, the economy as a whole could limp along for years, even after the recession has ended in a technical sense.
This is not to say that it's all hopeless, that there are no solutions.
But it's to argue that the permanent and lasting solutions aren't national ones; they require international co-operation.
Which is what the G20 conference was supposed to be all about - except that the really hard structural stuff will be a sort of Banquo's ghost at the meeting, scaring the living daylights out of the government heads, colouring their debate, but not at the heart of it.
As Martin Wolf points out this morning, the creation of an enduring economic settlement requires a formal recognition by the great exporting countries of China, Japan and Germany that their financial surpluses are our excessive debts - and that we will be a lousy market for the stuff they make until we've managed to reduce our deficits and have returned to full employment.
In other words they would benefit from reconstructing their economies so that they consume more of their income, because that would help us to reduce our indebtedness.
So even though they won't take lectures from us on how to manage their economies, because they blame our allegedly poor regulation of our banks for the woes of the world, it would be in their interest to help us mend our ways.
That said, there is an even more intractable problem, which is whether it's really possible to rehabilitate our banks while our banks' excessive liabilities are perceived as the liabilities of the over-extended US and UK public sectors.
There is, for example, a constant and destabilising battle between investors who want to sell the US dollar on the basis that America's banking system and entire economy is buckling under the weight of egregious debts and those investors who want to buy the dollar as the reserve currency and putative safe haven at a time of chronic uncertainty.
It is a tension that was elegantly deconstructed last month in a paper by the governor of the Chinese central bank, Zhou Xiaochuan.
He floated the idea that the world needs a new reserve currency, a supra-currency that floats above all national currencies, including the dollar, such that investors would have more confidence that it would retain its value even when a domestic economy as large as that of the US tries to inflate its way out of recession.
Just maybe, there'll be a nod from the G20 leaders that this is an idea worth considering.
And in the unlikely that there's any speedy progress towards the creation of a global supra-currency, many would argue that the truly optimal use of such a supra-currency would be as a unit of exchange for a new global fund, or mega bad bank, into which all banks' toxic assets would be transferred.
A return of near-normal credit conditions would probably be significantly speeded up - to the benefit of all trading nations - if the bad bits of banks were in effect transferred to the balance sheet of the world as a whole, rather than weighing down the balance sheets of individual nations.
However, that's certainly an idea too far for this G20 meeting. Most business people and bankers would, I think, settle for an acknowledgement from the government heads that this meeting is just one stopping point on a long and arduous journey.