The world’s response to the financial crisis has been more than unprecedented. Only a year ago, as James Grant has written, it was unimaginable. Interest rates have been sliced to zero. Governments have cut taxes, spent freely and promised to spend more: a trillion dollars here, a trillion dollars there, and soon you are talking real money. Investors and consumers have taken heart, some even imagining the boost from these emergency measures might be permanent.

That is irrational – although yesteryear’s boom shows irrational behaviour can last longer than most imagine. Still, it does seem to be happening. US households, for example, are not saving as much of their windfall as they should. In the last quarter of 2008, household debt fell $100bn or 1 per cent, as Andrew Hunt Economics points out, yet net worth fell $5,000bn, or 10 per cent, because of falling markets. As a result debt ratios have become worse, with much the same true in the UK. To better them, savings and defaults will have to rise – or governments will have to keep up the stimulus spending.