The intellectual credentials of Prof Krugman are not in question. But is he right to warn that even starting to tackle the fiscal imbalances today dooms us to another recession, or even depression? The alternative view, more popular in the circles I frequent, is that tackling debt with yet more debt is a far surer way to long-term ruin. Postponing the evil day, after all, was at the heart of the Federal Reserve's failings in the later years of Alan Greenspan's tenure and helped to land us where we are today.

Not even to begin laying the ground for reductions in public spending today, let alone to confront the huge unfunded liabilities that lie beyond budget planning horizons, makes little sense. On past form it will take years for any cuts announced today to be fully implemented, if indeed they can be achieved at all. Just as 364 economists turned out to be wrong when they denounced Sir Geoffrey Howe's infamous 1981 UK budget, it is not axiomatic to me that Prof Krugman and co are right this time.

In any event it is surely debatable to blame the imminence of spending cuts mainly on pressure from the financial markets. It is not, after all, as if the "bond market vigilantes" have been much in evidence recently. Long-term bond yields have been falling, not rising. Pointing out the inconvenient fact that Greece and other countries have unsustainable fiscal problems is hardly an insight confined to a few hedge fund managers.

What really seems to affront the liberal academic mind is the idea that financial markets - irrational, greedy and capricious as they indubitably can be at times - should be seen to be driving public policy in any way. Unfortunately, a good deal of the argument about fiscal consolidation is about the timing of economic recovery, the appetite for risk in the private sector and the second and third order effects of fiscal tightening. This kind of judgment in my experience has never been the forte of economists.

I take more comfort from Paul Volcker, who as a former chairman of the Federal Reserve has a gold-plated track record in dealing with the consequences of past financial excess (and was rightly lauded by Prof Krugman, among others, for that achievement). In a recent article in the New York Review of Books, after discussing his plans for banking reform, Mr Volcker observes: "The critical policy issues we face go way beyond the technicalities of law and regulation of financial markets.

David Fuller's view I agree with Jonathan Davis on this debate. In the West, too much of our modest GDP growth over the last decade came from public sector spending. Today, we need public sector pay freezes and spending cutbacks before we can begin to regain fiscal credibility. Most of us in the private sector have experienced pay freezes for some time. The recent crisis in Southern European debt markets, which is not over judging from Spain's new high yields today, is only the most recent historical evidence of what will happen, sooner or later, if governments fail to act. The longer-term challenge will be to encourage private sector growth.

Paul Volcker's article mentioned by Jonathan Davis was posted on this site last Tuesday.