The problem is that the fallout from this summer's turmoil in the financial markets after the crisis in the American subprime mortgage sector is not over. It has already been severe.

Merrill Lynch has suffered a $5 billion write-down, and Citigroup, Union Banque Suisse and Deutsche Bank have written down another $10 billion among them. Throw in the $1 billion in losses and write-downs from Bank of America, the $1.7 billion from Bear Stearns, the $2.1 billion from JPMorgan and Washington Mutual's 75 percent drop in third-quarter revenue, and the total costs to the financial sector are soaring beyond $20 billion. That is without counting the rescue of Britain's Northern Rock and other losses yet to be reported.

It gets worse. The credit squeeze is tight. Delphi, the parts group that was spun off from General Motors, has not been able to secure the $7 billion in financing it needs to get out of bankruptcy and start repaying its creditors, including GM.

Utilities in general are supposed to be doing well these days, since their steady income offers a safe haven for investors. But Calpine, the California power producer, has warned that its $8 billion financing package, arranged by Goldman Sachs, could fall through if it does not complete its reorganization by the end of the year and get out of bankruptcy in January. If it fails, some $4 billion in bonds will not be repaid.

The IMF has already cut its growth projections for the United States, Europe and Japan next year, which is worrying for China, which depends on those export markets. We have already seen some of the world's biggest companies turn in below-par earnings for the third quarter. Ericsson, Philips Electronic, SKF and Roche Holdings have this week all disappointed the markets.

So far, though the plunge in U.S. construction is taking about 1 percent off gross domestic product, few economists predict a recession, even in the United States where the trouble began. The formal definition of a recession is two successive quarters of negative growth. But all the signs suggest the world is heading for a period of much slower growth.

The good news is that, as economist David Hale puts it, "The world has been going through the best period of universal growth since the 3rd century of the Roman Empire." For each of the last three years global growth has been above 5 percent, so even a slowdown that halved the rate of growth would still leave the global economy growing by more than $1 trillion a year. That is a very healthy cushion for the expected soft landing -- if nothing else goes badly wrong.

The problem is that something is going wrong. The world's reserve currency, the U.S. dollar, has fallen sharply to 1.41 against the euro and to 2.03 against the pound and to below par against the Canadian dollar. But China and Japan have been selling their own currencies and buying dollars to keep the value of their own currencies down and thus keep their export prices artificially and unreasonably low for the American and European markets.

This imbalance in the currency markets comes on top of the underlying imbalance of the monstrous U.S. deficit on the current account. The U.S. Congress last week authorized a new federal debt ceiling of $10 trillion. It was below $7 trillion when President Bush came into office in January 2001, so it would be fair to say the cost of the Bush administration has been some $500 billion a year. As it is, interest on the debt is costing U.S. taxpayers more than $300 billion a year.

The prospect of a slower world economy may not be all bad. The Asian Development Bank notes that such a cooling might even help save the Indian and Chinese economies from overheating. It should also help cool demand for commodities like steel and wheat, which might help offset the inflationary pressures stemming from the dollar's fall, from the soaring costs of oil and shipping, and from China's voracious appetite for raw materials.

So the challenges this weekend for the leaders of the institutions that are supposed to manage the global economy are to find a way to manage the decline of the dollar, to take the pressure off the euro (which threatens to end Germany's export-led recovery) and to jawbone China and Japan into allowing their currencies to appreciate.

It would also help a lot if they could persuade Brazil and India to be more accommodating in the world trade talks. After their double no last week, the talks look like breaking down without a Doha agreement, and thus throttling the world's liberal trading regime whose development over the past 60 years has been the goose that laid the golden eggs of global growth.

It would also be excellent news if they could do something to unstick the credit markets and to reform their institutions to accommodate the new importance of China, India and the cash-rich energy exporters of the Middle East.

The biggest challenge of all, since the dollar is playing such a feeble role despite being the world's traditional reserve currency, will be to find some way of organizing a kind of currency co-dominion of the euro and the dollar.

But those two institutions have contradictory agendas. The Fed is relieved that the fall of the dollar has inspired a U.S. export boom and is cutting back non-U.S. imports and thus on the trade deficit. The European Central Bank, by contrast, wants a stronger dollar and less pressure on the euro.

The only likely compromise would have to include a revaluation of the Chinese and Japanese currencies, and the evidence from this week's Chinese Party Congress of a divided and contentious leadership in Beijing suggests that getting a clear decision and the necessary political will from the Chinese will be very, very difficult.

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