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Of the $1.2 trillion spending plan, some $300 billion will go to buying long-term government bonds and the other $750 billion will go to purchasing mortgage-backed securities to help revive the country's sagging housing market. This is unprecedented because the Fed has not bought long-term bonds since the 1960s.

But the Fed can only play a delaying game. Underlying the crisis is the huge black hole in the global financial system. Some have put forward a figure of losses in the system of $50 trillion, of which $30 trillion will be incurred by the US and the rest by other institutions worldwide.

The losses in the financial system are several times larger than the US annual gross domestic product. European banks are equally hard hit. The longer the action is delayed, the larger the black hole will become. But it is apparent that the financial resources of global central banks are not enough by far to fill up the huge losses.

With the prospect of a dollar slide, central banks' holding reserves in US dollars will be realising losses. Speaking from Tokyo, Chalongphob Sussangkarn, a former finance minister and now president of the Thailand Development Research Institute, expressed worries about any sharp fall in the dollar.

"The US deficit is so huge. This is why all countries, particularly in East Asia, are concerned because we hold a lot of these assets. What happens if the US dollar falls 40 per cent? Many central banks will be losing huge amounts of money," he told Reuters.

 But central banks, including the Bank of Thailand, are facing a dilemma as to what assets they should hold. The dollar is no longer safe, nor is the euro, which will also be hit by the recession. The yen is also tied up to the US. The Chinese yuan appears to be safer, yet China has yet to allow a free float of its currency. The Chinese leadership is very nervous over its huge dollar reserves and assets holdings. It now holds the world's largest reserves, at about $2 trillion. As I understand it, the Chinese monetary authorities are seeking to unwind their dollar positions in an orderly way to avoid disrupting the financial markets.

Strangely enough, several central banks still pursue competitive devaluation by buying up the dollar to keep their currencies weak, although there is little prospect of exporting under the present environment. Bank of Thailand Governor Tarisa Watanagase told me the other day that the central bank had already diversified its foreign reserves. She did not elaborate. But still, it will be interesting to learn which assets Thailand's reserves are going into during the current financial market turmoil.

The main reason we have got into the global financial crisis without a way out is because the banks and financial institutions were allowed to increase their balance sheets through crazy leverage. They have become monsters whose assets and financial activities are larger than the balance sheets of the central banks combined, and than the GDP of their countries. If central banks and governments are to save them all, they only have to dole out taxpayers' money or add quick zeroes behind their printed banknotes.

Instead of limiting their role to straight lending or providing financial products that are simple to understand and manageable, the banks and financial monsters have gone on a borrowing binge to leverage their balance sheets in order to maximise profits from trading and investment. The global banks and funds control most of the financial resources of this world. They issue crazy instruments, raise money on their own, invest money for their own gain, and have absolutely no regard for the public's deposits, which they use freely to leverage their investments.

All financial investments and trading must reflect the economic fundamentals. The financial bubbles were allowed to balloon far beyond the fundamentals. They could only go bust. And they already have. Now is the time for central banks and taxpayers to pick up the pieces. The question is whether the printing presses and the taxpayers' money are pouring out quick enough to prevent the financial system from breaking down entirely.