Two weeks ago, The Economist ran a piece saying trust was starting to run through the system again with the London Interbank Offered Rate (LIBOR), which measures how much banks pay when they get money from each other, was starting to come down.

But that was premature. True, government bailouts, interest rate cuts and cash injections have driven the three-month LIBOR down to its lowest rate in four years, but the banks are still hoarding cash. They have made it even harder for people to get money. MarketWatch reports that a record 85% of banks said they had tightened standards for commercial and industrial loans to large or midsize companies. That's up from 60% in the previous survey. And consumer debt has grown at its slowest pace in 56 years.

"Banks are cutting back, the economy is in a deepening recession and in that environment, I don't think banks are going to become a lot more willing to extend credit soon,'' Jan Hatzius, chief economist at Goldman Sachs told Bloomberg.

It's easy enough to understand. Conditions are so volatile and no-one knows how long this meltdown will go on for. And banks slashing interest rates - the latest being the Bank of England cutting rates by a bigger than expected 1.5% - will not fix the problem, it will not stop the fear and volatility. As John Maynard Keynes once said, cutting interest rates in a slump was like pushing on a piece of string. In other words, it had no effect. Never did, never will.