World must avoid protectionism

I talked to preeminent economist Norman Bailey. He made me aware of coming crisis in an area of real estate market in 2004. Here is what he said about present stage of crisis:

(1) the Federal Reserve and the Treasury addressed successfully the liquidity problem resulting from the solvency situation of the financial sector which had resulted in a freezing of credit. However that time is past and now the countries affected are going to have to address the solvency problem itself and that would require actually reducing the levels of debt, such as mortgage debt and credit card debt, so that people can start consuming again.

(2) The world must avoid protectionism. The dispute between China and the U.S. is very disturbing and dangerous

(3) As soon as possible the gigantic debt overhang in the U.S. and elsewhere has to be addressed by reducing expenditures to the extent possible rather than increasing them, which is the tendency at present. Otherwise there will soon by no choice but to inflate away the debt slowly by controlled inflation or rapidly through hyper-inflation.