Let’s apply the Alan Greenspan test to the credit squeeze. Last month, the former head of the Federal Reserve said: “The worst is over in the financial crisis or will be very soon.” He also provided a gauge. We would know the crisis was over, he said, once the gap between the London interbank offered rate (Libor) and the overnight index swap rate had narrowed to 50 basis points.

His gauge makes eminent sense. Translated into English, he was referring to the extra amount big banks charge each other for three-month loans, compared with the base rate set by the central bank. When the gap between the two increases, it shows that banks are hoarding cash, and reluctant to trust each other with a loan.