That’s a reference to its long-held ideology of forcing developing countries to cut spending and budget deficits in response to almost any financial crisis. It was a sort of cosmic chastity belt on fiscal profligacy.

So what better ally for the prospective iron prime minister David Cameron, and his plan for an “emergency budget” to deal with Britain’s “debt crisis”?

Well, incredibly, I would argue, Dominique Strauss-Kahn appears to have pulled the rug from underneath David Cameron.

Just an hour before a political beauty parade of party leaders up before Britain’s business elite, the IMF chief appeared to come down firmly on the side of the Prime minister’s slower approach to dealing with the deficit. He said that withdrawing fiscal stimulus prematurely risked a double dip recession.

Of the UK specifically he said that the private sector economy is still not normal enough for withdrawal of fiscal stimulus and will have to last “some time more”.

For good measure he also markedly softened his naked opposition, expressed into our cameras at the G20 meeting in St Andrews, to Brown’s proposal for a serious look at a financial transactions tax that looks a little bit like the Tobin Tax.

All proposals are on the table and will be studied, he said, which wasn’t suggested only a fortnight ago.

But the effect of society’s choices over family size is undoubtedly worth considering in terms of the effect on climate change.

Some close to the Copenhagen negotiations feel that its the elephant in the room.

Certainly population growth is a vital determinant of how much humanity consumes, but not on the official agenda for those urgent talks to limit global carbon emissions.

So a delicate issue, yet today, for the first time the United Nations issued a report linking demographic pressures to climate change.

Thoraya Ahmed Obaid, executive director of the UN Population Fund told me today that ‘this is the first time we are clearly speaking about the link between population growth and climate change’.

In 1994 in Cairo the UN did say that population was linked to environment, but this is the first time the body has linked it specifically to climate change.

The report quotes an intriguing study which says that putting the world into a low population growth path, leading to 8 billion rather than 9 billion people on the planet by 2050, would save 2 billion tonnes of carbon dioxide emissions.

But it’s not just that: there’s a huge wedge of the world’s population soon to come to child-bearing age … so is the answer for those rapidly growing countries to adopt coercive Chinese-style single child policies?

No, says the UN, this is not about forced population control, but enabling women to decide for themselves to have less children.

Education, empowerment of women, and contraception can all help mitigate climate change, says the report.

Of course almost all the likely growth in world population is happening in developing countries who emit far less Carbon than for example a child in Europe or America.

It’s the process of development that will see that population growth be increasingly carbon intensive.

The middle class in the world – earning at least $8000 a year stands at around 800 million now but is forecast to grow rapidly in the next two decades to 2 billion by 2030.

That’s two billion people who want to fly in planes, drive cars and eat lots of carbon intensive meat.

But that development will also naturally limit population growth as people become richer. so it’s a complex picture.

For now this is a new direction for the UN – the suggestion that condoms aswell as low carbon cars, can limit climate change. But it won’t be discussed in Copenhagen.

Speculators must surely be next in line for the pre-election chopping block. Oil traders in particular can surely not be spared from growing public anger over petrol prices.

There is, I’m told, a glut of oil and petrol products in the markets. There is most definitely a glut in spare capacity from producers such as Opec. In fact Saudi Arabia alone has capacity of 4.3 million barrels per day lying idle. Spare capacity is at a peak. A glut should mean low prices, but in the strange world of oil futures and derivatives, it has not.

Today the motoring organisation the AA came out against speculators, telling Channel 4 News that there “absolutely” needs to be government action to rein in speculation. I have been told by one of the UK’s most senior oil executives that last year’s spike in the crude oil price to $147 (and subsequent crash to $34 by Christmas) was the result of speculation.

But what can be done about it, I hear you shout. Speculation increases liquidity in markets, doesn’t it? Helps them make markets more “efficient”, guv. As the FSA were recently quoted as saying, speculation is not manipulation of the markets.

Well next month the US regulator, the CFTC, is likely to adopt limits on the size of bets that any single commodities trader can make in oil and other markets. There had been some frustration in the US that much of the damaging speculation was routed through London, the so-called “London loophole”.

The FSA has denied this, but did sign an information-sharing agreement to share trading data between UK and US exchanges in August. And despite pressure from the G20 the FSA has so far played down the prospect of a US-style clampdown.

It’s worth noting that no one in the London has ever been prosecuted for manipulation or market abuse in the commodities markets. Perhaps it really doesn’t happen in London at all.

A decade ago, during the dotcom boom, then Science Minister Lord Sainsbury extolled the virtues of Lara Croft, the videogame character, as a symbol of Britain’s dominance in high value added ‘weightless’ industries.

It can be no coincidence that last month Lord Mandelson was spotted with his own trusty Brompton.

The Bank gave out slightly conflicting messages today. On the one hand, in his choice of words Mervyn King emphasised the long hard road ahead, a prolonged period lasting years of adjustment to lower levels of public and private debt.

On the other hand, the charts underpinning his inflation forecast suggested that economic growth could top 4 per cent in just over a year’s time (remember that economic growth is yet to restart in the UK).

The Bank’s quarterly health check is suggesting signs of life in the patient.

But the Bank does not want this to be interpreted by the markets as a sign that it will put up interest rates or withdraw QE money creation anytime soon.

In many ways that judgement on the timing of rate rises, which may plunge Britain back into trouble, will be the most controversial and politically impactful decision made by the independent Bank of England.

It’s a lot harder to protest against the G7 rich man’s club, now that it’s the G20.

The agenda is somewhat more murky when it is China refusing to discuss climate finance, rather than the UK or the US.

So you could pass such protests off as an irrelevance.

As it happens, within the real meeting, one of the main aims of these campaigners – the Tobin tax – was getting the biggest boost it has ever received.

The idea that global currencies trades, capital flows and other trades could be subject to a small percentage tax has been a longstanding pipedream for development campaigners. It has two purposes.

To throw sand in the wheels of speculative activities (the description of Nobel prize-winning US economist James Tobin in 1978), dampening down its worst excesses.

And also to raise around half a trillion dollars for something: global poverty, climate change, debt relief, AIDS, malaria: take your pick.

Gordon Brown’s espousal of it, among four long term responses to the credit crunch, was a shock.

It is a proposal that has long interested economists.

Lord Turner was slapped down after musing about it in the summer in an interview with Prospect.

But there was a reference to the policy at the Pittsburgh G20 leaders conference. And let’s not forget that these days with it being the G20 and not the G7, the likes of Brazil are already around the top table with policies such as a 2 per cent tax on capital flows.

Eight years ago I chanced upon an unlikely source of support for a tax on speculative activities: George Soros.

‘I’m in favour of the Tobin tax. It doesn’t happen to coincide with my personal interest, but it could be a very good source of funds for providing global [public] goods,’ he told me in 2001 when I was Economics Correspondent at The Observer.

The main critique has been that it was impractical, and impossible to enforce if not agreed by the whole world.

Well, that appears to be the Prime minister’s agenda.

Though it’s worth knowing that a previous French proposal to study a Tobin tax to fund the Millennium Development Goals was vetoed at a G7 meeting, while Gordon Brown was chancellor.

Of course this is a highly political move.

George Osborne has outflanked the government on being tough on bonuses. He is desperate not to be seen as friendlier to bankers that Mr Darling and the Prime minister.

In an election Labour will be keen to paint him as an banker- loving Tory.

So he will tread carefully around this policy issue. Of course the banking lobby is against it. But the international community is not as against some form of this idea as you might think.

Having “saved the world economy” in Act 1, Act 2 appears to be the no less thorny task of saving the world itself.

The Chancellor has forced climate finance to the top of the agenda at breakfast tomorrow. The UK/EU plan is for finance worth $100bn per year from 2020, half of which will be raised from the private sector through carbon market mechanisms.

The controversial bit is the other half. Which governments should pay for carbon abatement, mitigation, and percolation of green technologies to fast-growing economies so that they may prosper and grow using the least carbon possible?

The existing developed countries, AKA ‘the North’, AKA ‘the rich’, are responsible for 75 per cent of historic carbon emissions on this planet.

They are by far the cause of the current climate change challenge.

However, as the Chancellor will point out in a speech tonight, 90 per cent of future emissions will come from the emerging and developing countries, such as Brazil, Russia, India and China. The EU plan calls for some sharing of the burden of this 50 billion per year between historic and future polluters.

But here at St Andrews the Chinese in particular are saying No. There had been an attempt to do the heavy lifting work here in preparation for the Copenhagen summit.

The Danish prime minister will gatecrash this meeting alongside the British one. But tonight, all hope of a climate change finance deal here appears to be disappearing. We’ll know more after breakfast.

* The Chinese know all about breakfasts at these summits. When it was the G7 rich man’s club that ruled the roost, and many were complaining about China’s exchange rate policy, they did invite Chinese officials to attend as an observer.

But they were booted out after breakfast whilst the G7 crafted communique after communique that criticised the Renminbi policy. On climate change and elsewhere the BRIC countries are making their voice heard loud.

Brazil’s current policy of taxing capital flows would have been laughed out of a G7 meeting, but will politely accepted tomorrow.

The other major agenda item is building a sustainable world economic system.

Mervyn King has called the global imbalances, which I reported on from China using a dim sum table, the fuel behind the fire of the credit crunch.

The hope from G20 leaders is that the next leg of world growth will be sustainable and balanced, that North American won’t consume 30 per cent of the world’s output and will stop borrowing so much.

And that surplus countries like China will start spending more and stop accumulating three trillion dollar mountains of Forex reserves.

Very very interesting, but slightly academic.

A cynic might say that having “abolished boom and bust” in Britain, this is a rather lofty attempt to abolish boom and bust across the world. But it is heartening that one of the key geoeconomic lessons of this crisis is being learnt at the highest levels.

The Bank has just voted to increase its money creation exercise to £200 billion. A £25 billion increase is a little less than had been expected.

The Monetary Policy Committee is marginally less worried than thought about last month’s shock news that the economy is still in recession. It may be marginally more worried about the prospective inflationary consequences of its epic money creation scheme than the City believed.

What we can say now is that Britain is the undisputed QE world champion, that this policy has been pushed further than any developed country in modern history.

So ‘is QE working?’ is now a £200 billion pound question.

Passing judgement on quantitative easing (QE) is a bit like divining the impact of water fluoridation on Britain’s dental standards. You can see some sparklier teeth in Britain’s credit markets, but is all of that really down to the Bank’s extraordinary experiment?

The most tangible impact has been on the market for government debt, where the Bank of England has gobbled up the extra government debt, lowering the price the Treasury pays by over a full percentage point.

Today’s news saw a sell-off in that market, with that interest rate increasing by 0.1 per cent. The markets clearly see the fact that there will be “just 25 billion” of QE in the next three months, as a high watermark for the policy (QE to date has been running at £25bn every month).

David Cameron warned in his Tory party conference speech that QE had to stop at some point, and only then would we see the true demand for British government debt. We are now close to that point.

So what’s it achieved? Well there has been a flurry of larger companies that have bypassed the stodgy banks, by raising money from capital markets to reduce bank debt. Typically they issue corporate bonds sold to the likes of pensions and insurance companies. This is part of the story of how QE has helped the economy.

But it is impossible to say what proportion of this extra lending has come as a result of the Bank’s experimental policies and what has come from a general improvement in sentiment.

So QE has disproportionately helped larger companies rather than smaller companies. It has helped banks too. It may have helped pump up asset prices around the world. And, indirectly it has clearly contributed to a helpful fall in the value of sterling. Not quite a devaluation, but not a million miles away from it either.

The donkey has been kicking a little in the past few days. There have been some strong manufacturing and services sector survey numbers earlier in the week. But there were more bad numbers out today.

So the question remains about when this policy gets unwound. When does quantitative tightening begin? Well it’s never been done before. And the Bank will want to be completely certain that the donkey is alive and kicking, before they remove its tail.

As part of the QE arrangements the Chancellor and the Bank of England Governor Mervyn King swap letters. Normally it is an eminently forgettable spot of legalese.

Not this time.

The Chancellor chose to use the letter to issue what can only be termed ‘a gentle prod’ aimed at the Bank of England. Mr Darling appears to want the Bank to use QE to lend to companies directly by buying so-called commercial paper. This hasn’t happened so far.

Then, in January, came Bailout 2.0, which we were told would be a bailout not of the banks, but of the economy. That bailout was to enable the banks to continue lending to prospective homeowners and to businesses.

And now we have Bailout 3.0.* Incredibly, the extent of actual taxpayer funding into these two banking giants will be larger than the first bailout, which rescued them from collapse. £40bn more.
This will be spent on banking shares that have fallen in price since the last tranche was bought. RBS, two years ago the sixth biggest bank in the world on some measures, will now be 84 per cent owned by the state.

To be fair to the Treasury, this outcome was indicated back in January, though it had not been expected that all the £25.5bn would be needed up front. There’s also an incredible tax break, worth billions for RBS, which reflects their ability to charge losses against future tax bills. It must have caused the government accountants a headache.

What really has changed is that the extent of the guarantees: the so-called contingent liabilities have been reduced markedly. Lloyds have sidestepped the government’s toxic waste guarantee scheme, so £260bn of HBOS’s rotting commercial property and mortgage assets will now be dealt with by the private sector. The process of due diligence has also shrunk the RBS guarantee from £325bn to £282bn.

I had previously pointed out that the APS was seen internally as the biggest government contract signed since the Lend Lease arrangements with US forces during world war two. As Lloyds exits, this may no longer be the case. Indeed having gained £2.5bn for a nine-month insurance policy that did not pay out a penny, Lord Myners may wish to start up shop as an insurer if he leaves government next year.

So arguably the situation is better than the worst-case scenario envisaged by Bailout 2.0. The taxpayer no longer has to worry about HBOS’s toxic waste dump. But more money more quickly appears to be seeping into RBS.

The crucial difference is that this happening at a time when we are told there is no money for anything else. No money for public sector pay. No money for other industrial or consumer stimuli. Small wonder that the government shot George Osborne’s fox by banning cash bonuses to anyone at these two banks earning above £39,000.

*The biggest hedge fund in Britain, is how Robert Peston referred to this deal. The government is borrowing money at 3 per cent to buy shares in banks. It’s the classic story of leverage that funded the champagne lifestyle in Mayfair.

Of course, the next leg of this analogy is to point out that the Treasury’s deficits are actually being funded by the Bank of England, which in turn is creating the money out of thin air. No hedge fund has those powers.

- Get new posts from Faisal Islam’s blog emailed to you. Sign up here for free (link takes you to Google’s Feedburner service).

So why doesn’t the home secretary appoint a panel of independent economists to advise on drugs policy instead? At the moment drugs policy seems to be authored by a coalition of tabloid headline writers and frightened politicians.

An economic take would be a forensic and brutal assessment of some unpalatable trade-offs.

Despite illegality in almost every nation, the UN estimates 8 per cent of world trade is illegal drugs. It’s a massive number. It is as yet unclear how that held up during the post-Lehman collapse in world trade.

So the first point is that, despite the tens of billions spent on the “war on drugs” around the world, there’s little evidence that it is effective. According to the UNODC, between 1994 and 2008 opium production has surged from 5,000 to 8,000 metric tonnes per year (due to Afghanistan), and global cocaine production has stayed pretty constant at around 900 metric tonnes.

However much is being seized, there is a much greater capacity to produce. So the legitimate question here is whether or not the war on drugs is cost effective.

Drugs can ruin healthy lives. The UN estimates that there are between 18 and 38 million problem drug users in the world. Interestingly though, that is a small proportion of the 250 million who have used in the past year without it becoming a problem, according to the UN.

The big unknown is how much a more liberal drugs policy would increase usage and therefore health costs. If illegal drugs were legalised and then taxed – as argued by economists like William Buiter – there is a chance that the exchequer might not lose out. There’d be at least £1bn in VAT.

That is not to say that there would be no pain for families and some communities where use goes up. But this brings us to the elephant in the room: crime.

Home Office figures show that the UK illicit drugs market is worth between £4bn and £6.6bn. Class A drug use generates an estimated £15.4bn in crime and health costs. Crucially, between a third and a half of all “acquisitive crime” – that’s mugging, burglary, stealing – is drug related. That is an awful lot of pain.

I’ve seen it for myself in my hometown. No-one would want to be behind policies that led to an increase in the zombied frenzy of crack addiction. Nonetheless, by far the most painful manifestation of the drugs trade are the pensioners, young mothers and families who are harrassed, robbed and knifed by drug addicts looking for the money for their next fix.

So it is conceivable that there exists a drugs policy that minimises the costs of this type of crime, or even wipes it out altogether.

Economics is about trade-offs, about cost-benefit analyses. It is possible that different approaches to drugs policy could lead to less pain in communities afflicted by problem drug use, than the current approach.

But any move in this direction would require some mental dexterity currently absent in our politics, an ability to see beyond the binary world of being “soft” or “hard” on drugs. I can’t imagine a policy area where the frank assessment of independent experts, whether scientists or economists, is more necessary. But I’m not holding my breath.

So on an internationally comparable definition of recession (multiple consecutive quarters of contraction) the US has exited recession. It’s worth noting that within the US itself the NBER defines recessions in a different way, and is yet to pass judgement on this matter. What we can definitively say is that growth has returned to America, in a way that it hasn’t returned, for example, to Britain.

Breaking down the numbers there was some impressive growth in consumer spending and residential investment. Businesses seem to be successfully clearing out their inventories, which also added to growth. The question is whether businesses can lick themselves back into shape quick enough to offset the severe pressure on consumer spending that will arise from near 10 per cent unemployment – the worst set of figures for nearly three decades.

This also underlines the role of America’s massive stimulus programmes. I visited a few of them in August. One a newly-laid airport runway at a municipal airport in Elkhart, Indiana. Unashamed Keynesianism in the backyard of the University of Chicago. In Baltimore, land of The Wire, stimulus dollars paid for a new ferry taxi service across the bay where McNulty and Bunk can often be seen clueless and drunk. There is a remarkable map of US Keynesianism at Recovery.org.

So for those that crow that the US is out of recession and Britain is not. Well the logical next step in that argument is for Britain to have had a stimulus on the US scale. It is absolutely no coincidence that, as predicted here on Friday, George Osborne markedly piped down his rhetoric on cutting the deficit this year, during his speech on Monday.

Today’s figures from the US are an argument against too hasty a fiscal contraction, even given our admittedly parlous budget deficits.