Flushed with the euphoria of Barack Obama’s “Yes we can” victory last November and with the vast breath-taking sums of money he is throwing at the various stages of the financial crisis that is engulfing America and the world, many world leaders and opinion writers, even locally, seem to have got the ‘Obama bug’ and are suggesting spending, spending, as the way out of the global crisis.

The numbers keep getting wilder and wilder. What had been Hank Poulson’s remedy for the toxic banks back in October (Was it that recent? It seems like an age ago already) is now clear that it was never going to do anything substantial. The latest figure, just to clear the toxic mess and to bail out the stricken banks, is an astounding $2 trillion, and may not work even then. And that’s just the banks. Then there’s the car industry in the US and the whole American economy.

The 1,000-page American Recovery and Reinvestment Act of 2009, which calls for $504 billion in deficit-financed spending, does not mean the money will be spent all at once and immediately. We may be far away from the discussions in the American media right now but what looked like a promising presidency is starting very badly: one third of the sum may not be spent before next year. The rest may be tied in the various procurement processes of federal and state governments for months and months.

There are, then, other issues. The act includes $286 billion of tax cuts and credits. Individuals earning less than $75,000 a year and families earning less than $150,000 will receive credits of $400 and $800. The sheer smallness of the tax credit has disappointed many. And most probably it may not effect the re-birth of an economy brought to its knees: most of the added money will be spent in paying for overdue credit-card imbalances and the rest may well be spent at Wal-Mart, to the benefit of the manufacturers in China.

Obama had a different economic situation in mind when he came up with his winning electoral programme. The US economy, already in heavy deficit, now has to take upon it not just Obama’s original spending plan but also the huge expense of the compromise reached between Democrats and Republicans to do something about the crisis.

Whether it will work or not still remains to be seen over the coming months. Over on this side of the world, however, despite the obvious importance of whatever happens to the US economy, things are getting bad for reasons that sometimes reflect and mirror what is happening in the US and sometimes for area-specific reasons. The UK, for instance, mirrors enormously what happens in the US but the meltdown that is taking place in many East European countries is unfortunate in that the renaissance that followed the collapse of Communism was too fragile to be sustainable, and unfortunately, like their counterparts in the US, many banks especially in Austria were too liberal in their lending. The collapse in the East will produce some big victims in the EU.

Governments are falling under the popular pressure: Iceland first, now Latvia. Others will go before the recession is over.

Keynes is back, Milton Friedman is out.

There must be a way out of this madness but probably things will get worse, far worse, before they get any better. The sheer complexity of the issues involved, for one thing, but also because of the seeming inability of those who should know, the economists, to see clearly the way ahead. Few, very few, were the economists who saw what was coming and the scale of what we are seeing now. And, on top of that, the seeming inability of policy makers to see the way ahead clearly and to take courageous decisions. To see Obama, with his huge majority and the groundswell that took him to the White House, flounder is hugely instructive.

What’s to be done? Let’s take it sector by sector: there are the various sectors with various specific situations and needs. Take banking, for instance. One is now not so sure that a bail out, except of such huge proportions as to be impossible of any country, will work. That’s for starters. One then still does not know the extent of the toxic funds, the unsecured loans, the money lent on a wing and a prayer that will never come back, even with all the repossessions that can, and will, be made. Some say whole scale nationalization will do the trick; others point to the Swedish 1990s model. Obama chose to throw money at the problem, but when Timothy Geithner, the new Treasury Secretary, unveiled his plan, Wall Street plunged 382 points in response to what was called a “half-baked” proposal.

Besides, the bail out of banks is not popular at all as people are against bailing out those who caused the crisis in the first place.

Next comes manufacturing, which as The Economist explains, is a completely different situation where there is, and will be, much pressure for a government bail out, or the next best alternative, which is protectionism, but both are wrong, deeply wrong. Read The Economist for the reasons.

Lastly, the separate States themselves. Italy’s Giulio Tremonti has put the problem in quite clear terms: “If the problem is an excess of debt, the cure is not adding more debt, whether that debt is private or public.”

There is a vicious way and a virtuous way and this country, to be specific, must choose the virtuous way. Spending or throwing money right and left is not for us. Maybe it’s right for Obama, though one doubts it. The best, the ONLY, way for us is the virtuous way outlined for us in the European Commission’s not all that complimentary report published this week.