We are flying blind. The Federal Reserve’s announcement this week that it was abandoning conventional rate measures in favour of directly propping up lending represents a bold experiment in policy. Ben Bernanke, Fed chairman, is taking a gamble – but he had little choice. Aggressive easing, however, creates its own difficulties.

The US real economy is crumbling and continues to deteriorate; the global downturn has been exacerbated by a crippled domestic financial system. Credit is not flowing to consumers and businesses because risk spreads are too high.