The world has had more than a decade since the 2008 financial crisis to prepare for another global downturn. It has not used that time well. Now a large shock has arrived, in the form of the coronavirus outbreak, at a moment when the world’s largest economies are divided by trade disputes. An uncoordinated policy response that prolongs economic weakness and triggers a new round of currency wars is a real danger.

Much is still unknown about the disease known as Covid-19. What is known, however, suggests the only effective response once it gets a foothold is an all-out quarantine effort like China’s and now Italy’s. The inevitable result is a big global economic shock. Spread of the disease, including in the US, contributed to a dramatic fall in global stock prices and bond yields this week.

In an ideal world, every central bank would confront this challenge with a healthy level of inflation and interest rates above 5 per cent. If Covid-19 hit domestic demand, they would cut rates as needed. Governments would provide targeted fiscal help. There might be some currency swings, depending on which countries were worst affected, but there would be little cause for global economic tension.