CLAUD Cockburn, renowned journalist, good companion, and wit, died in 1981. He was 77 and had been gravely ill for a long time. His widow Patricia said to me: "The only thing that annoyed Claud about having to die was that he wouldn't live to see how it all turned out."

I thought at the time that none of us -- not people half his age, not their children -- would live to see how it all turned out. Now I'm not so sure. If Claud Cockburn were still alive and monitoring this week's events with his old eagerness and mordancy, he would have been certain that at long last he was witnessing the Beginning of the End.

A year ago, the American magazine 'Counterpunch', jointly edited by his son Alexander, reprinted a despatch he sent from New York to 'The Times of London' on the day of the Wall Street Crash in 1929. There can't be many people still around who remember that day, but any who do remember must think, as he would, that they see history repeating itself this week.

Warren Buffett, the Sage of Omaha, talks about "an economic Pearl Harbour". He supports the astounding $700bn (€480bn) deal placed before the US Congress by the Treasury Secretary, Henry Paulson, and the chairman of the Federal Reserve, Ben Bernanke. Bernanke is an expert on the Great Depression which followed the Wall Street Crash. He knows the score.

Do the members of the Congress know the score? On Thursday night we all thought they had come to the point of agreement; in short, that we could see how it was all turning out. We were wrong. Maybe they will have done the deal by the time you read this, or at worst by this afternoon. If not ...

If not, the time has come to recall a splendid Cockburn quotation about the Masters of the Universe:

"What arouses the indignation of the honest satirist is not, unless the man is a prig, the fact that people in positions of power and influence behave idiotically, or even that they behave wickedly. It is that they conspire successfully to impose upon the public a picture of themselves as so very sagacious, honest and well-intentioned."

So they do; but sometimes they do something even worse. They convince themselves of their own sagacity, honesty and good intentions in the face of all the evidence. This does terrible things to their brains.

By the looks of things, it has completely wrecked John McCain's brain. This man thinks of himself as a dauntless maverick, always behaving in character, always standing up for his beliefs. But his record does not bear him out.

Barack Obama's people rightly point out that in the Senate he supported George Bush 90pc of the time. And he has fought a dirty campaign. He has tried to turn a world crisis to his personal advantage. It was grotesque to try to cancel last night's debate with Obama; and the sheer viciousness and cynicism of the Republican campaign was exposed by the hysterical attacks on the Democratic candidate.

If the opinion polls have got it right, the voters have found the Republicans out. But how long until operations to delude the public begin to succeed again?

Let's suppose the Congress accepts the administration's package -- on terms dictated, not by the Republican ideologues who object to any government involvement, but by the Democrats who want measures to protect the public interest. (Warren Buffett, by the way, thinks the government can make a substantial profit on the deal.)

Will that be enough to save the world financial system? Most economists would probably give you a hesitant "yes". But what happens next? Most likely, a period of consolidation, over-regulation as a reaction to the lax regulation which contributed so much to the crisis, high interest rates, unemployment, and serious pain for small business. Not much in the way of alternatives.

And our own Government had better be careful about consolidation, mergers and takeovers.

This amazing week, which brought us the American contortions and the confirmation of the Irish recession, also brought the death of Paul Tansey, a lovely man and a fine journalist. One of the many economists who attended his funeral said: "Two bad balance sheets don't add up to one good balance sheet."

Paul Tansey was one of those who would have asked, not only what happens next, but what happens if there is a "next"? All too likely the next "next", as it were, will be the same old "last". The process will start all over again, with more of the fancy financial packages which 'Time' magazine calls "pixie dust", more bonuses, more dodgy loans, more booms, more and bigger busts. Voters everywhere will allow themselves to be conned again, and politicians will engage in self-delusion again.

Can we prevent it? Actually, yes. We can't change human nature, but we can improve institutions.

Unfortunately of all institutions, governments seem to be the hardest to reform. Claud Cockburn gave political journalists a famous piece of advice: If you want to predict the future accurately, think of the worst thing a government can do and say that it's going to do it.

So what is the worst thing our present sagacious, honest and well-intentioned Government can do now?

It has already done the worst thing it could possibly do. It has lost the Lisbon referendum. But it can now do something almost as harmful and stupid. Either the Budget will address itself seriously to the real world, or it will be another exercise in tinkering, obfuscation -- and, yes, self-delusion. At any rate, we will see how this bit of the crisis turns out.

jdowney@independent.ie

- James Downey