The past year has seen an unprecedented monetary stimulus unleashed on the world – although it is not quite true that we have never been here before. In 1990, in response to the savings and loan crisis, Alan Greenspan cut rates, committed to keeping them low, and freely supplied funds to US banks. Such policies are common to today's quantitative easing programs – although, as Andrew Hunt Economics notes, they were not called QE at the time. It was, perhaps, half QE.

The result was a familiar “melt-up”. Banks borrowed from the Federal Reserve at 3 per cent, and bought longer-dated Treasuries that yielded twice as much. Thus recapitalised, they created further liquidity, engendering a rapid financial recovery. Equity markets soared, bond yields dropped, and emerging markets boomed. Recovery in the real economy followed three years after.

So far so good. Then came the meltdown. Greenspan started to tighten in 1994. But because banks were so highly leveraged to government debt, this produced a bond market rout. The price of 10-year bonds collapsed, yields soared, liquidity was sucked out of the system and the recovery stalled. Emerging markets suffered particularly: Mexico's Tequila Crisis followed in December.