The global economy has been decelerating sharply and, of course, the downswing is a synchronised one. There is gloom in every region and country, as news comes in of this or that economy slipping into an officially recognised recession. But, unofficially, ordinary people already knew how much it was hurting.

The idea of decoupling has been thoroughly discredited by the evidence. Really, it never made much sense in such an interconnected global economy. And, after all, this was a global credit bubble, not a local one. The silly idea of decoupling was propagated by the folks at Goldman Sachs and spread like a virus around Wall Street and beyond. Luckily, some of us have a natural immunity to such viruses.

The Goldman lads have also sheepishly reduced their ebullient forecast for oil prices. They were right when the price for crude shot up to giddy highs and thoroughly wrong when it started plunging. Global economic weakness means demand destruction is taking place, even as supply remains plentiful.

Talk by Opec members about the need for coordinated production cuts is unconvincing because, in current circumstances, those who are desperate for revenue will cheat like hell. Meanwhile, marginal fields have become uneconomic, not to speak of expensive sources such as the tar sands. Also, oil firms are cutting back on exploration activity, which is positive for oil prices in the next upswing in global growth.

Disinflationary forces predominate, as a result of sliding commodity prices, weak labour markets and falling consumer demand. Policymakers are anxious to ensure that this does not turn into outright deflation, reminiscent of the Japanese experience. None is more desperate than Bernanke.

Deflation is absolutely toxic for debtors. Given the state of household finances in America, falling prices would guarantee a recession even more severe and long-lasting than it is already promising to be. So the desperado chairman of the Fed will stop at nothing to try and prevent it from happening. Be prepared to see even more unorthodox means being employed to fight possible deflation.

Some people are still focusing on interest rate policy, and chatter about rate cuts. But that's not where the action is. The effective fed-funds rate is already well below the one-percent target rate. Policymakers have turned their attention to quantitative easing. But to get this to work isn't always as easy as it sounds. For example, banks aren't showing a great deal of interest in using their excess reserves at the Fed to increase lending. And who would blame them in current circumstances, as economic conditions deteriorate and their loan losses mount.

There is genuine fear of a vicious cycle taking hold such that financial stress leads to weaker spending, generating higher loan losses and further financial stress. It is essential to try and prevent a nasty concoction of a liquidity trap, price deflation, debtor distress and rising defaults.

Car-company executives are the latest in a long line of mendacious porkers heading to Washington to feed at the public trough. You don't need experts to analyse the egregious errors committed by these incompetents — over many years — which has led to their present quandary. Any schoolboy can figure out the solution and recommend immediate bankruptcy proceedings. Once again, the risk is that the government will feed the pigs, waste taxpayers' money and distort the market mechanism.

The US continues to be a highly leveraged economy. Households are in the process of deleveraging, trying hard to reduce their debts and increase their savings rate. The government, on the other hand, is leveraging madly, like there was no tomorrow. More than a few observers are questioning the sustainability of leveraging on this scale. Printing money and issuing a massive amount of debt can have nasty consequences. Foreign creditors are forewarned.

The same folks who told us yesterday that household borrowing wasn't a problem are making similar mollifying noises about government finances today. Ultimately, if worse comes to worse, the Americans may be prepared to do an Argentina. This is a well-known tango at the end of which creditors lose their shirt. Serves them right, you may say, for not listening to their mother's advice to choose their dance partners carefully.

Iraj Pouyandeh is a strategist and senior portfolio manager at LOM Asset Management. He manages the LOM Global Equity Fund. For more information on LOM Asset Management please visit www.lomam.com