ALMOST 15 months after the demise of Lehman Brothers, one wonders whether the financial crisis is over or whether we are in the second half of the real-sector crisis.

We have an odd situation whereby the financial markets are having a record year of profits after governments rescued the financial institutions with massive guarantees and zero-interest- rate policies.

The US dollar has depreciated and the carry trade is creating bubbly conditions in the emerging markets.

In the real sector, growth in industrial production and GDP remains negative in the advanced countries, while unemployment is over 10 per cent in the United States.

However, emerging markets are all beginning to show signs of recovery.

Hence, some economists are declaring the crisis over.

Others say that we have wasted a good crisis, because the very success in stemming panic in financial markets has reduced the political will round the world to reform markets and economies structurally.

The party in Wall Street is not over, because no one has taken away the punch bowl.

Some Wall Street bankers will receive bonuses that are even larger than those in the peak year of 2007, less than one year after they were rescued by the government.

Others think that with zero interest- rate policies, more bubbly has been added to the punch.

This once-in-a-hundred years financial crisis will be debated for years to come, either because it was resolved quickly or decisively, or because the majority have been fooled by the short and quick recovery.

In hindsight, we had two excesses.

In the advanced countries, we had excessive financial engineering, built largely on leverage.

Excessive financial engineering - and leverage - was due to excessive consumption, which ultimately led to the global warming problem. Last year, when the price of oil reached US$147 per barrel, central bankers were in a dilemma as the high oil price could lead to global inflation.

Less than three months later, the world crashed into deflation. In the emerging markets, we had excessive real engineering capacity, because much of our production was designed for export to the advanced markets.

As the deleveraging proceeds, the emerging markets will have to cut back on the excess capacity and therefore the real-sector restructuring is only just beginning.

If the real-sector restructuring leads to massive unemployment, the political mood will get ugly and protectionism will return. Thanks to the zero-interest rate policies, the world is one big carry trade and emerging markets are very bubbly.

Investors are now once again caught between greed and fear.

Greed drives a lot of them to join the momentum play, fear rising as prices go higher and higher.

Dubai gave a reality check that property prices do not go upwards forever.

Under the current zero-interest- rate policies globally, the whole world will pay for the losses incurred by Wall Street.

Who benefits from zero interest rates? The real sector is still borrowing at pretty high rates, because the whole purpose of low interest rates is to subsidise the banking system by giving banks a big spread, the difference between lending and deposit rates.

If the US fiscal deficit is now over 10 per cent of GDP, the Federal Reserve's balance sheet has trebled.

The risk of future inflation is rearing its head.

This accounts for the fact that gold, commodity and house prices are back up as a suitable hedge.

In other words, the cost of the current crisis will be paid for globally via future inflation, taxation, unemployment and lost consumption.

Because the US dollar is the dominant reserve currency, those who hold dollar assets will share part of that burden of depreciation.

What is quite clear is that most of the world is going to pay for this crisis.

So, please send an Xmas card to those Wall Street bankers who are enjoying record bonuses to remind them that all of us are paying for their party.