The Jackson Hole conference that starts today will not be as exciting as the Democratic convention next week, but the discreet gathering of central bankers and economic policymakers in Wyoming may well prove to have a more substantial bearing on the lives of people around the world than the razzle-dazzle in Colorado next week.

For the stewards of global capitalism — the central bankers who oversee the distribution of money and regulate the banking system — meet with their credibility in question. In the European and US economies, growth has moved sharply into reverse, the near-forgotten scourge of inflation is once again on the rise and there are recurrent fears of the imminent collapse of a big financial institution. Government officials in the command economies are openly questioning the Western model of free markets, open trade and global competition. And as people in the West have begun to feel the squeeze, they have begun to have their doubts too.

The chief conundrum posed by the coincidence of the credit crunch and the inflation crisis has been whether to cut interest rates to spur flagging growth or to raise them to keep a lid on rising prices. This is generally treated as a technical question. It is as much a philosophical one. Should greedy bankers and imprudent borrowers be bailed out for their excesses in order to safeguard short-term prosperity or should they be punished in order that they learn the error of their ways and behave more prudently in the future?

The US Federal Reserve has chosen to take a more relaxed approach to profligate borrowers and troubled banks. Ben Bernanke, the Fed Chairman, talked tough this time last year. “It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions,” he said. Since then, however, the Fed has cut interest rates seven times. It has helped to orchestrate the bailout of Bear Stearns, backed up by a $28.2 billion loan. And last month the Fed stood behind Fannie Mae and Freddie Mac, America’s two troubled mortgage giants.

The Bank of England, by contrast, has been more of a stickler for the old orthodoxies. It made the moral hazard argument when anxious City institutions asked for a quick fix of cheap money last summer. The Bank stood back from Northern Rock, because, as Mervyn King, the Governor, explained, it had neither the opportunity nor the ability to bail it out. And it has maintained interest rates at 5 per cent, as it seeks, unsuccessfully, to keep inflation at bay.

The standing of both Mr Bernanke and Mr King have been damaged by their handling of the credit crunch. To be fair, the complexities and challenges of dealing with systemic threats to the financial system and an inflationary choke on the world economy have meant that there have not been any clear winners. Comparisons between the Fed and the Bank are also blurred because they have different mandates: the Americans ask their central bankers to take care of inflation and drive growth, while the Bank of England has the sole task of managing inflation.

But there are growing signs that the Fed has handled things better than the Bank.

Certainly, the Jackson Hole conference offers an essential opportunity to examine the merits of the “bailout” versus the “belt-up” philosophy to dealing with the credit crisis. Mr King is not a regular at Jackson Hole, nor is he there today. But it would have been a handy year for him to listen in. For the tradition among the bankers who turn up to the Wyoming mountain resort is to dress down. As far as stewarding a faltering world economy goes, the world needs them to smarten up.