Krugman: "We are in very deep trouble."

[Sorry everybody for the minimal blogging. I spent 45 minutes yesterday on a post, only to have the software eat it without leaving the barest crumb. And then I couldn't get back onto the site the rest of the day. Anyway, today's the last day of my winter vacation. Back to work, and full-speed blogging, tomorrow.]

Paul Krugman says that we have now become 1990s Japan. Excerpt:

Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.

Meanwhile, BBC economics editor Robert Peston sets a similarly grim tone. Excerpt:

What is profoundly unsettling to central banks and governments is that growing numbers of businesses and consumers are opting to save rather than spend even as interest rates fall to these record lows.

Which is why those central banks and governments are taking ever more desperate steps to stimulate growth through increases in public spending and to make money as cheap as possible.

And that of course raises the question about whether the worst threat we currently face is deflation or inflation.

At the moment our economies turn, there's a genuine risk that central banks won't be able to drain all this cheap money from the system quickly enough to avert quite a surge in the inflation rate.

Against that background, I conducted an unscientific poll of leaders of some of our biggest multinational businesses at a lunch a few days ago.

I asked them to think about 2010, and whether they were planning for that to be a year of deflation or inflation.

To a man (this isn't me being sexist, it's that world: they were all men), they said they expected a sharp rise in the inflation rate.

They said this in a resigned way, as though it was the bill for a party that had been far too expensive and had gone on far too long.

So: all that money you're saving now, having reformed your free-spending ways? It will be worth less if inflation hits us hard next year. Perhaps the thing to do, then, is to spend what you can afford now and in the after-Christmas deflation, because you may not have it to spend if inflation attacks. Me, I plan to stock up on rice and beans. I'm not kidding. This is an awful position to be in, because doing the virtuous thing -- saving -- may be to little avail in a situation of serious inflation.

I predict President Obama's going to spend 2009 chain-smoking.