The IMF World Economic Outlook notes that the desired process of rebalancing global demand from countries with large trade deficits (notably the U.S.) to countries with large trade surpluses (notably China) is not going very well.

Relatedly, it points out just how difficult it is for increased demand in developing economies to offset stagnant or falling demand in the much slower growing advanced economies.

After watching Jack Layton's state funeral, I noticed that Jean-Claude Trichet's speech from Jackson Hole is online. The European Central Bank president does not seem to get it. Far from acknowledging that last month's interest-rate hike was premature, he touts "price stability."

The Great Recession was followed by an anaemic recovery in the advanced economies, which threatens to be followed by a double dip or worse now that the fiscal stimulus measures of 2009 and 2010 have been succeeded by austerity programs.

Now we face a new financial crisis, or at least a stock market correction of major proportions, which may precipitate a new phase of the crisis.

The financial markets seem to suffer from acute schizophrenia, with the bond markets demanding more fiscal austerity in much of the Euro zone, while stock markets are panicking at clear signs of slowing U.S. and global growth.

How should governments be responding to the panic in the markets?

Not, as they have, by caving in to the bond markets.

I was in Athens over the long weekend attending some meetings. Here are some further notes from a beautiful but deeply troubled country.

July 2, 2011: A discussion over lunch with a senior adviser to the Greek government.

On how long it will take for Greece to recover from the current debt crisis: "It is going to take us 10 to 12 years to work our way out of this. And then we'll be okay."