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Extraordinary times require extraordinary measures. For the historically minded, it was amusing to see both the Russian and US governments produce plans to shore up their financial markets by buying assets.

The Russians, of course were able to act on it straight away - none of that consulting with Congress nonsense. In Britain, apart from arranging a shotgun marriage between Lloyds TSB and HBOS, the FSA stepped in with a ban on short-selling financial stocks. Blaming the speculators is a tactic as old as speculation and may please the Daily Mail, but it won’t make homeowners any more likely to repay their mortgages in the face of rising unemployment and falling house prices. We are reaching the end game of the crisis, in which governments throw everything they can think of at the markets. If the banks need capital, and the private sector is unwilling to provide it, then the government will do it. If the money markets freeze, then the government will lend money. And if interest rates need to be cut, eventually that will happen.

If this works, then we will be off on another up leg of the cycle. If it doesn’t, then we are facing a repeat of Japan in the 1990s or (even worse) the US in the 1930s. Deleveraging is a very painful process to stop, just as it was difficult to predict when the dot.com bubble would burst. Alas, people buy financial assets because they have gone up, regardless of valuations. Often they borrow money to do so. The result is that, when prices fall, they have to sell assets (to repay debts) regardless of valuation on the way down. Breaking this spiral is all a matter of confidence. Investors have to have the confidence to buy assets at firesale prices, and not hold back in the hope of lower prices six months later. Bankers have to have the confidence to lend money, and even more crucially not to force borrowers into the early repayment of loans. That confidence needs a catalyst and maybe the knowledge that the government is supporting asset prices will do the trick.

Certainly, it would have been a huge risk to let HBOS go to the wall, if that was where it was heading. The one thing this country does not need is a repeat of Northern Rock-style queues outside branches. The £35,000 deposit insurance scheme is of only limited help. Plenty of people (particularly the retired) have a lot more cash than that. One encouraging indicator was that an age-old signal has worked its magic again. On 17 September, the yield on the FTSE All-Share index rose above the yield on gilts for the first time since March 2003. That sparked a four-year rally. Within two days of the signal being triggered, the FTSE100 was surging again, recording its biggest ever one-day gain.

Why is this indicator significant? Because it means that investors are getting dividend growth for free. During the 1980s and 1990s, you had to accept a much lower income if you wanted the benefits (and risks) of owning equities. Now investors don’t have to make that sacrifice. And the signal emerged when the FTSE100 was below 5,000, a level which in previous columns I have suggested might prove a buying point. This crisis is so fast-moving that it would be foolish to call an end too soon. The Resolution Trust Corporation-style plan mooted in the US may prove unworkable in practice, too slow to implement or simply politically toxic (using taxpayers’ money to bail out rich bankers). But the scale of the market rally in response to the announcement indicates that investors are desperate to find a catalyst to buy. In itself, that is an encouraging sign for the future.