The usual cure, monetary and fiscal tightening, will not work for panflation.
By any of the usual rules of monetary policy, the situation calls for aggressive rate cuts.
But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower.
They have not only extended the usual limits of monetary policy by buying government bonds and other assets (see chart).
And the E.C.B. will face more difficulty than usual crafting a monetary policy that fits both the ailing countries as well as the faster-growing economies like Germany and France.
Mr. Bernanke, who called unemployment "the most important problem we have right now," offered additional details in evaluating the steps the Fed could take, having exhausted the usual tools of monetary policy.
Unfortunately, the scale of the financial crisis, which left behind a huge overhang of consumer debt, depressed the economy so severely that the usual channels of monetary policy don't work.
And if recession, or something close to it, is imminent, then by the usual reckoning, that monetary policy works only with a lag of 18 months or more, it is too late to do anything about it.
As usual, the International Monetary Fund, the European commission and the European Central Bank will come up with forecasts showing that the latest set of austerity measures will boost confidence, promote investment, stimulate growth and lead to lower unemployment.
The failure of any of the usual fiscal and monetary policy tools so far raises questions about what the Federal Reserve and federal government can do in the near term to counter the forces that have battered housing prices and pushed down the stock market and are now causing a hiring slowdown.
