As already pointed out by the press and media commentators, there are many unresolved issues with the proposed financial bailout: how to select the assets to be purchased; their price; the structure of the proposed holding entities or funds; their administration and supervision. And not least, the likelihood that for an enterprise of this size, brought into being by fear and constructed in haste, the likelihood of success is not high.

The overriding reason, however, why this bailout should not be attempted, and will fail if implemented, is simple: $700 billion not nearly enough.

To explain this, let us backtrack a few years to the origins of the current situation. For several years now the US has run huge trade and budget deficits, flooding the world with dollars. In earlier years such outlays were recycled through foreign investments in US debt and assets. Two new developments, however, have vitiated this process.

The first was the low interest rates which the Federal Reserve maintained for most of the period under consideration. This created an acute demand for investments with higher yields. The second was the fact that even as the amount of money to be recycled was increasing, investment opportunities in the US economy were actually decreasing, due to corporate outsourcing, share buybacks and political and security limitations. The money flowed into Wall Street, but little of it went any further.

Nevertheless demand for high-yield investment generated a corresponding supply. Since the availability of assets in the "real" economy was limited, new assets were created within the financial system itself. They were of various kinds, but can be covered by the loose designation of "derivatives". Unlike the tangible assets of the "real" economy, all backed by some sort of actual collateral, the value attributed to the new financial assets had only a tenuous, if any, connection to any kind of collateral at all. Save for model-based valuations and the good faith of "counterparties" no objective valuation was possible.

This process of "asset inflation" was accelerated and magnified by the fact that, thanks to leverage (a fruit of the over-abundance of money), investment within the financial world produced, for a time, yields far superior to those obtainable in the real economy. These yields led to the myth "the new financial capitalism" which, basically, created huge wealth out of nothing.

As the size of this financial asset market grew into the tens of trillions, the value of the instruments being created was bound to be questioned at some point. The fall in house prices was the trigger, with mortgage-based derivatives the initials victims. Ironically this is the one asset class within the new financial universe which still has a connection, however convoluted, with existing and tradable collateral.

The $700 billion requested by the Treasury might, with a great deal of luck, somewhat sanitize this asset category. But cleaning up the remainder of what has been created within this financial bubble would require sums beyond anyone's reach.

This brings us to the primary and most fundamental issue. While all attention has so far been given to "fixing" a financial system that has bankrupted itself, almost none is paid to the needs of the real economy. Even the banking system, outside of New York, is left to fend for itself - as are the major industries and the entirety of small business.

A fraction of the sums involved in the various financial bailouts (past, present and future) would have far greater impact, in terms of employment and economic activity, if invested in the real economy. The most pressing needs are in the areas of energy and infrastructure, where the fruits of (intelligent) investment would be immediately felt by the general population.