The recent falls in output (GDP) in the American economy are a cause for serious concern. In the six months from October 2008, the total size of the economy shrank at an annual rate of just over 6 per cent. This is faster than any comparable period since the Great Depression of the 1930s. The most serious post-war recession to date was that of the early 1980s, and at its worst, in the winter of 1981/82, the annualized fall in output was -5.5 per cent.
So what has happened to all those policy initiatives in the fall of 2008?
Nationalizing Freddie Mac and Fannie Mae, bailing out AIG, forcing retail bank mergers. Oh, and yes, printing huge amounts of money to prop up the banking system, saddling Americans with public debt for years to come.
The answer is simple. Things might look bad in the US, but they look much worse in other major countries, especially those which have been more reluctant for the government to intervene.
The chart below shows the path of the current recession in America, the UK, Germany and Japan. In each case, the previous peak level of GDP is set equal to 100, so the levels show how much GDP has fallen in the recession. The green line, for example, is Japan. The recession there started a bit earlier, in the first quarter of 2008. And by the first quarter of 2009, Japanese GDP had fallen to around 91 compared with the previous peak of 100, in other words about 9 per cent down.
GDP in the current recession in the US (blue, top), UK (red), Germany (orange) and Japan (green, bottom). In each case, the previous peak level of output is indexed at 100
Britain has also pursued a very active policy, following America's example. And the recession there is also less severe than in Germany and Japan.
Of course, these latter two countries are more export-oriented and have suffered disproportionately from the dramatic fall in world trade. But their governments have equally been more reluctant to take dramatic internal actions.
The fact is that the world was hit by a truly massive financial shock in the fall of 2008. The West was already in difficulty - as in the mid-1970s - following the rise in the oil price to over $100.
Things may seem bad - indeed they are. But without the policy response of the American authorities since the fall of 2008, the world would already be in the throes of another Great Depression.