Seeing the threat to the world economy’s vital functions, the policymakers have been working overtime. Interest rates have been cut dramatically. American rates are already down to 1 per cent; Britain’s are at a 50-year low; and (last) week China’s central bank lopped 108 basis points off its main policy rate. Hundreds of billions have been pumped into banks and financial markets. Many financial institutions have been bailed out: the rescue of the once mighty Citigroup is merely the latest unthinkable to happen.

Despite all this, the patient has not responded. This is partly because some traditional remedies, such as looser monetary policy, are weakened in a credit crunch. It is also because the doctors have been ham-fisted: look at Hank Paulson’s changes of mind about whether to use America’s $700 billion rescue fund to recapitalise banks or to buy toxic assets. In addition, though, a lot of policy has been far too timid. Halting the world economy’s decline will demand something rather bolder than anything seen so far in this crisis.

That means redoubling existing efforts in each of the three traditional areas of policy: bolstering banks; providing greater fiscal stimulus; and cutting interest rates. It also involves using more unorthodox tools, such as interfering directly in credit markets by buying up assets...Mercifully, the world is not at that stage yet. But it is getting closer...When private demand sags so dramatically, the public sector must step in to boost spending, and boldly enough to make a difference. In America, although Mr Obama has refused to give a figure, talk among Democrat bigwigs is of a fiscal boost worth $500 billion-700 billion, or 3-5 per cent of GDP. Plainly, not all countries can afford precisely the same dose of fiscal stimulus. Those reliant on skittish foreign capital have less room to take action than those countries with large amounts of domestic saving. But cautious incrementalism, ironically, risks letting the world slip ever further down the deflationary spiral. It is time to follow Mr Obama’s lead and jolt the patient back to life.

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