What is the significance of the latest round of financial chaos - the fire sale of Bear Stearns and the short-sellers' conspiracy against HBOS? Does this mark the beginning of a much more painful phase of the financial seizure that, despite all the lurid headlines, has so far done surprisingly little damage outside the rarefied world of global high finance? Or will these two incidents be remembered as the cathartic moment of maximum panic that occurs near the end of every bear market, the point that drew in largescale unlimited government and central bank support without which no financial crisis is ever complete?

The second, optimistic, conclusion was suggested by the stock market activity in the first half of the week, after the government bailout of Bear Stearns, the biggest player in the US securities market, when Wall Street enjoyed its biggest rally for five years. By Wednesday, however, the markets appeared to be sending the opposite message, reversing most of the previous day's stock market profits, succumbing to the malicious rumours about HBOS, Britain's biggest mortgage lender, and sending commodity prices into a tailspin. Many analysts interpreted this reaction as proof positive of a coming deep global recession.

So which interpretation is right? Almost all financial experts, from George Soros and Alan Greenspan to the City and Wall Street analysts who dominate the airwaves and the newspaper columns, insist that the worst lies ahead, indeed that events so far have only hinted at an impending financial apocalypse. I feel equally confident, by contrast, that the banking cycle is now at, or very near, its nadir and that conditions in America will soon start improving, although more trouble is still in store for Britain and the eurozone.

The honest truth, however, is that nobody has any real idea - not Greenspan nor Soros and certainly not the loud-mouthed leader writers and media commentators, which of course includes me. Convincing arguments certainly exist for both the pessimistic and optimistic versions. It is plausible, for example, that banks will become even more reluctant to lend as the US and world economy sink into recession and house prices keep falling. This tightening of credit will, in turn, push asset prices even lower, precipitate corporate bankruptcies and job losses and make bankers even more scared. The world economy will thus be sucked into a vicious circle of dislocation and financial panic that cuts in interest rates and taxes will be unable to stop or reverse.

There is an equally persuasive argument that the US economy is not even in recession, since growing exports are compensating for much of the weakness in housing and consumer spending. And better still, a period of much stronger growth lies ahead only a few months ahead.

In May and June every American household will receive a cheque for between $600 and $2,000 under the $165 billion fiscal stimulus plan passed last month by Congress. As a result of these tax rebates, personal incomes in America will grow by an astonishing annualised rate of 14 per cent in the third quarter. If even half this money is spent in the following six months - and it surely will be, since the tax rebates have been targeted at poor Americans who spend their entire incomes and then some - US consumption is bound to enjoy a strong rebound in the second half of this year.

And once the stimulus from the tax rebates runs out at the end of the year, the US economy will receive another shot of adrenalin from low interest rates. Interest-rate changes always take 12 to 18 months to affect the economy, so the steep rate cuts introduced since last November will have their maximum impact on consumption, investment and employment in the first half of 2009.

The implication of this cleverly designed combination of fiscal and monetary stimulus is that decent growth is virtually guaranteed from the summer onwards. Provided a total financial collapse can be avoided for the next three months or so, therefore, the risks of the vicious circle of recession and credit contraction will have vanished by July.

These diametrically opposite stories are both plausible, so how can anyone decide which is true? One way is to look for evidence in the financial markets themselves. But this is useless at present because investors are so confused that different markets are sending opposing signals. Bond prices, for example, now point to the deepest depression for 40 years, while stock markets suggest only a mild recession - and commodities and oil prices imply a global boom. To make matters worse, the signals have recently been reversing almost daily.

A second approach is to focus on economic theory and past experience, but this is no help either intoday's specific circumstances. There are some very powerful forces acting in opposite directions on the world economy and theory does not make it possible to say in advance whether the expansionary forces of fiscal and monetary stimulus or the contractionary forces of falling house prices and tightening bank credit will prevail.

Does this mean that we must simply shrug our shoulders and resort to the cliché “time will tell”? To do this is certainly more honest than pretending to be clairvoyant. But for businessmen and investors there is another approach. This is to supplement economic theory with an understanding of politics and human nature. If we apply what we know about human nature, the balance between the depressing force (the credit crunch and fear) and the opposite, the stimulating force (tax cuts, interest-rate reductions and state bailouts), becomes much clearer to judge.

America, with its “can-do” optimistic approach, always has a bias towards growth rather than stagnation - and this bias is likely to be overwhelming in an election year. The Federal Reserve Board, the White House and Congress will do whatever it takes to revive growth, support the financial system and mitigate the damage from a house-price decline.

And if their actions appear to be insufficient at any stage, they will just keep doing more. They will bail out their banks, use public money to guarantee mortgages, offer new legal protections against foreclosures and do anything else that seems to be necessary until recovery is assured.

This is the main lesson from the Bear Stearns rescue. Unfortunately, there can be no such confidence in Britain or Europe.

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