The catastrophic destruction of wealth than began in January 1990 has left assets ? equities and real estate, mainly ? deflated against a mass of liabilities that are mainly bank loans.

These lead to tighter credit conditions and falling stock prices as their collateral assets are liquidated. In this case, two of the failures are insurance companies, whose assets are entirely financial securities.

If the euro does tumble again -- and we think it will -- we must expect the ECB to orchestrate another round of currency intervention.

With less credit available, less growth is possible. So we are looking at a bad situation here that we fear can only get worse.

The growing perception is that Japan is falling back into a dark hole of recession again.

We do not see any fundamentals strong enough to keep it up there --unless there is a lot of intervention with other governments joining in. We expect the move will fail.