Another term, another financial crisis

The world seems to be a more stable place than it was a few months ago. The stock market has had a record run in the last quarter, house prices are stabilising, even the pound has stopped falling against the Euro.

Does this mean the financial crisis is over? I doubt it. The public finances are a mess and we can't see any fundamental change to them until after the election. What then? My guess is that whoever wins is going to squeeze public expenditure hard. Universities, inter alia, will be in for a thin time of it. However the size of the cuts needed to reduce borrowing to manageable levels is enormous. The alternative course of action - a rousing bout of inflation - is going to look awfully tempting to whoever wins the election. Index-linked bonds anyone?