After a boom, we are chastened. We learn to distrust excess. It's a lesson that is said to protect us from the next rush of blood for ten or fifteen years.

Really? Our moderation has lasted not ten minutes. For we can chase excess in two directions: up... and down. First mad one way, have we turned swiftly mad the other?

Not long ago, the deluded talk was of “the new stability”, an “end to boom and bust”. Now it is “the age of austerity”. On the heels of one self-regarding momentum comes another. For if the fault of the past lay with a lack of proportion - bankers' bonuses, cavalier risk, foolish optimism - where is proportion now?

As evidence of its absence, we could start with the £37 billion bailout of the banks, widely regarded as epic. Though a huge change for the bankers, it was for the rest of us both easy and cheap.

First, the bailout is capital, not current spending. It is not like the schools' budget to which it has been absurdly compared. It is simply a recomposition of government assets. You might have cash; you might have shares; you might move money from one to the other. Doing so is not the same as eating a prodigious quantity of cake. The bailout is not consumption of taxpayers' cash. If you borrow to acquire an asset, you have that asset to set against your borrowing and the net position is as before.

In fact, the Government might well turn out to have acquired these assets for a song. All assets can go down in value (that includes cash in times of inflation). These have a good chance of going up.

Being capital assets, not current spending, the best measure of their size is to compare them with the capital value of the Government's right to tax, a right it enjoys in perpetuity.

A modest way of calculating this would be to assume that the annual income it provides (more than £500 billion) is a five per cent return on capital, giving a figure for the capital value of the right to tax in excess of £10,000 billion. (If that calculation is a struggle, think about it as a way of working out what you would sell the right to tax for. Twenty times what it brings in annually is a standard method). What all this means is that, economically, the bailout was achieved without breaking sweat. If necessary, the Government could do the same again and again.

But our leaders can't help themselves. One lot cry apocalypse, the others want to be heroes, saving the day. They are abetted by the media, who love a crisis and anything with a lot of zeros after a pound sign. Proportion might view both more sceptically.

It might go on to recall the first reports of falling industrial production, when a recent change of 0.2 per cent - tiny given past volatility - was treated as evidence that the bottom was falling out.

Look for the very last downward drop on the chart illustrating this article and imagine you are back in the summer when this was published by the Office for National Statistics and read into it, if you will, the beginning of the end. Naturally, the whole chart was not shown in the newspapers, but the fact that the numbers were going down created great excitement. Was that reporting, or doom-laden forecasting?

The same goes for retail sales, now probably well on the way down but buoyant for most of the year, yet reported since Christmas as if the high street were blowing with tumbleweed. Typically, any bad month for Marks & Spencer was greeted as “evidence of a high street slump”, words used in January.

Proportion might also note that when the BBC reported that the British economy had “ground to a halt” last quarter, some of us were in fact still going to work each day. “Estimated output remained constant” would have been more boring, but at least true.

Or that the “record” US deficit reported last week with ill-disguised lust was nothing of the sort, regularly being exceeded as a share of national income in the 1980s and early 1990s. Almost every economic indicator sets a record in cash terms almost every year. To report one does not convey information, merely mood, and the requisite mood in this case is gloom.

Or that the continuing low level of wage settlements, though unpleasant, has the great benefit of helping to persuade the Bank of England that inflation is not setting in, and that interest rates can be cut further.

None of these observations is the definitive measure of the economy. But all are valuable and yet few are heard. The biggest threat to the economy comes not from one relatively small, though important sector of the economy - the banks - but from collapsing confidence here and in America, encouraged in part by apocalyptic headlines, aided by politicians in a world where every pint pot has to be a quart.

Unfortunately, the pain will still be real and may be severe. We may well drink too deeply from misery exactly as we once did from exuberance.

What's more, sentiment has the potential to move us farther, faster than before. This is because we are richer. Since the last recession, our income has grown by more than 50 per cent in real terms. Increased wealth means more of our spending is discretionary, less goes on essentials, and we can stop our discretionary spending at a stroke if the mood takes us.

There always were real problems in the economy, but mood matters; and the mood of recent weeks seems to be feeding mostly on itself. That is the characteristic of booms and busts down the ages: they overshoot.

In short, we are asking for it - and it looks increasingly as if we will get it. The greatest feat of political leadership would have been to show us how to come down slowly and not too far. What we have needed, and still need, is moderation. A pity: moderation doesn't sell.

Michael Blastland and Andrew Dilnot are co-authors of The Tiger That Isn't: Seeing Through a World of Numbers

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