The series of denials include: denial that the American or western banking system would be more than a few billion dollars out of pocket from the subprime lending crisis; denial that the demise of key Wall Street investment banks presaged the collapse of the whole financial system; denial that corruption and greed were cancers that had spread to the vital organs of capitalism; denial that fast-growing Asia would be affected by a supposedly American crisis.

Two recent events have underlined the global mess. One was the disclosure of the global Ponzi scheme under which supposed Wall Street wizard Bernard Madoff creamed off US$50 billion from renowned financial names. He was so good at calling the market, said Britain's financial 'superwoman' Nicola Horlick, who was hoodwinked into parting with US$20 million. Other victims included Steven Spielberg, billionaire Mort Zuckerman, numerous Jewish charities, not to mention HSBC and the Royal Bank of Scotland.

From a skyscraper of cards to solid industrial assets, that most respected giant of modern industry, Toyota Motor, announced it would make an operating loss for the first time in its 71 years. Toyota, a synonym for lean and efficient production, said it had sold 700,000 fewer cars than expected and its operating loss would be US$1.7 billion, a huge turnaround from its original profit forecast of US$6.8 billion for the year to March 2009. Toyota is not some ailing company building dinosaur SUV gas guzzlers, but a leader in energy-efficient hybrid vehicles.

Toyota's grim predictions were proof that the crisis has spread to Asia and is eating at solid manufacturing industry, and not limited to soft financial tissue.

Toyota blamed worldwide recession plus the sharp rise in the yen. Reactions of the markets, from stocks to currencies, commodities and oil, tended to exacerbate rather than soothe or smooth the bumps. Supporters of floating currencies should be asked how manufacturers, exporters or importers can cope with the sharp volatility of exchange rates.

Oil was a paradigm: its price soared to US$147 a barrel on the pretence that all would be well, then fell to US$44 when reality hit, too low for Saudi Arabia or Russia to pay for their ambitious social programmes, almost low enough to put the SUVs back on the road.

Mr Bush brought leaders, not merely of the big seven industrialised countries, but the 20 top nations (including a few minor ones), to pledge to work together to combat the crisis. Today, weeks after the summit, individual countries are going their own separate ways, dangerously for the global economy. Russia, France, Germany and China are among the offenders pursuing narrow national solutions.

The US and Britain slashed interest rates and boosted spending to prop up their economies, but Germany is reluctant to spend. The Frenchman heading the European Central Bank was more cautious than the Frenchman who is head of the International Monetary Fund. Moderate EU interest rate cuts intensified the rush to the euro as the world's next reserve currency.

Dominique Strauss-Kahn, the head of the IMF, was almost apocalyptic in his plea for urgent action, warning of potential violent unrest in response to a global slump. The IMF wants massive sums of US$120 trillion in fiscal stimulus, 2 per cent of global output, pumped in to fill the gap from slumping private demand.

The lesson is that it is not merely capitalism that is in danger but the whole set of economic and political relationships that governs the way the world works - or not.

Mr Obama will take over the world's most powerful nation and its biggest economy, but America needs to win friends. China must be the first, and President Hu Jintao has to be wooed and persuaded that he has to fill the shoes of a global leader, not merely a powerful nation.

It will be harder for America, much of whose recent illusion of prosperity was built on bubbles, first the stock market, then housing. Mr Obama has hit the emergency spending button, but the US will soon have to revert to saving mode. This can't happen if China also tries to sell its way out of its own crisis by devaluing the yuan. China has to develop its market for its own people, not just to make baubles for bankrupt westerners.

Together, the US and China should talk to other countries constructively about use of oil, the quest for alternative energy and sustainable protection of the resources of an increasingly fragile planet.

Worryingly, China and the US share some of the same tendencies: stubborn, self-righteous, not willing to be pushed around, reluctant to understand that there is a world outside which may not share the same views but whose support is needed. Can Mr Obama and Mr Hu realise that they are citizens of the world, not merely leaders of its two most powerful nations? Equally hard, can they lead other leaders and their own people to appreciate just how parlous is the plight of this Earth in 2009?

Kevin Rafferty is a political commentator