Ben Bernanke will make things a lot worse by repeating Alan Greenspan's mistakes

I take my life into my hands as I venture this – but are US base rates of 1pc really the answer? I would argue emphatically not.

Rates hit 1pc after 2001/02, when then Fed chairman Alan Greenspan swung his monetary chainsaw willy-nilly. And that unleashed the biggest credit bubble the world has ever seen. I thought we all understood that. However, now Ben Bernanke risks repeating his predecessor's mistake.

In the US and across the world banks aren't lending to each other due to fears about the hidden sub-prime toxic waste that lurks on each other's balance sheets. Cutting base rates does nothing to curb that problem.

In fact, by giving US banking executives hope that the economy may recover before they have to write down the full extent of the losses they have buried, the Fed only further delays what is so badly needed – a thorough purging and consolidation of America's banking system. And as central banks elsewhere follow the Fed and slash rates, this debilitating torpor is exported.