Extreme mood swings from panic to mania, fear, speculation and confusion- that is the state of the economic system at the moment. Massive swings in share and commodity prices. The system is being tranquilized by massive doses of liquidity being injected into it. The percentage of national debt in terms of GDP for the UK is outside the limits set by the Maastricht Treaty. The US are in negotiations regarding obscenely massive bail outs- a policy which is in direct opposition to the belief in free markets- a belief which has been pedalled in a religious fanatical fashion.
This is total market failure.
Free markets can't work without being heavily regulated it would appear. But we also know that markets can't work effectively if they are heavily regulated (the best example is the failure of communism). This is a trap. The pendulum has just swung from one side to the other- regulation doesn't work and neither does freedom.
Who knows what is going to happen next?
I suspect the answer to this problem will not lie solely in economics. The whole concept of trying to run societies based predominantely on economic models is probably flawed. There is after all more to life than money. Capitalism in many ways is similar to a religion which is based on many assumptions and beliefs. It is when people loose their faith and trust that they start looking for something else.