On a practical level holdings rates where they are while sounding the inflation horn is probably the soundest thing to do? Give the markets the expectation that rates will rise without dampening current stimulus or making the cost of oil worse. The goal being to allow the situation to stabalize some. There will still be solvency issues out there but we can't grow our way out of those without causing crippling inflation.

Can we grow again the way we have the past few decades? There may be some life left in this situation but I don't think much. Even the countries which have been powering global growth are feeling the pressure of energy/food costs. Scarcity will constrain growth potential.

This is, of course, a problem because a lack of growth reduces job growth and earnings potential. Slowing growth can reduce costs but since supplies are finite growth is capped. All old ideas. Point being what one needs to do is encourage savings and redistribute high end wealth to maintain possible economic levels before wealth is destroyed, and decralize production to increase per unit labor requirements, which creates inflation and rolls back productivity destroying standards of living but maintains a workable economic model.

I am sure you saw reports of the BP report on oil reserves giving us an ability to maintain current levels of consumption for 42 years. Of course if you want growth consumption goes up, the window closes. This may force the decentralization of production wiuthout much policy input. Not only do you may cost of moving goods, you have the cost of moving managers, the travel requests from ex-pats and commuting workers, the ability for labor to re-locate, the raw cost of energy makes decentralized production more viable. Moving raw materials or components will be cheaper than moving people.

If we cam maintain near the current level of global economic activity while expecting lower growth but concentrate on better wealth distribution we really may be in a tolerable situation. But we can't let the pschological effect of lower growth destroy our ability to maintain a workable model.