Not so good

Since the words ‘credit crunch’ entered the public lexicon last summer, many politicians and pundits on both sides of the Atlantic have maintained a state of blithe denial about the economic danger signals that were increasingly apparent. But this week, amid worldwide stock-market turbulence, some painful truths have been confirmed.

In Washington, the Federal Reserve acknowledged the threat of a sharp downturn and possible recession in the US with an emergency interest rate cut of three quarters of a per cent. It was the biggest cut for almost 25 years, and it seems, for now, to have succeeded in its immediate aim of averting a Wall Street crash. But it was also seen as a panicky admission that the real state of the American economy is even sicker than was widely supposed. That sense of unease has led to calls for further rate cuts, perhaps even as soon as the Fed’s regular monthly meeting at the end of January.