In brief - the central banks don't come out of it very well, and Knight encourages them to stiffen their sinews against political pressure for easy money to stave off a downturn, and concentrate more on fighting inflationary pressures. (Seems to be the Fed that he sees as the prime suspect.) High inflation could continue past the end of next year, and a recovery could be a long time coming, Knight warns.

Also today: the LA Times (via Calculated Risk) looks at the effects of $200 oil. Already, it finds, people are spending upwards of $1000 a month on their commutes to work. The knockon effects are hitting everything from restaurants to prizefighters in car-dependent America - and putting the equivalent of a 9% tariff on goods imported from east Asia. And for those of us who use public transport routinely (ie pretty well everyone who works in central London) there's some unconscious humour:

Transit advocate Kymberleigh Richards said new riders on popular routes such as Wilshire Boulevard, Vermont Avenue or Sherman Way in the San Fernando Valley "are going to have a bit of a culture shock. It's a different world to be using public transit when you're used to being in your own vehicle by yourself."

The overall effect was best summed up by Paul Krugman earlier this month: The world gets bigger. ("...Fortunately, I no longer have to do a lot of flying to SE Asia and South America to keep tabs on the world financial crisis; I can get there on New Jersey Transit.")