Instead, most talk in Davos was centred on how to deal with a continuing crisis, rather than how to emerge from the current mess. Companies were preparing to batten down the hatches; the International Monetary Fund was drumming up support for a doubling of its financial firepower to deal with the risk of the crisis spreading; Asian Development Bank officials told western countries: “A 200 per cent capital increase is needed to address the current financial crisis as well as medium-term development investment needs in Asia,” as they prepared for loan demands from countries such as Indonesia, Thailand and Vietnam.
One central banker set out the need for greater confidence in an off-the-record session using the tools of modern game theory to come to a similar conclusion as Keynes' paradox of thrift, in which private caution and virtue is a public vice.
There were many stable states of the world, he said. A good one is where businesses invest, banks lend and these decisions are profitable because everyone is doing it at the same time.