Bear Stearns, one of the largest global investment banks and securities trading and brokerage firms in the world, marks the moment when the global financial crisis went critical. Up until last Friday, it had been possible – just about – to believe that the worst was over and that things were about to get better.

That pretence was stripped away when JP Morgan, at the behest of the Federal Reserve, stepped in when the hedge funds pulled the plug on the fifth-biggest United States investment bank.

It is now clear that no end is in sight to the turmoil, and the reason for that is the Fed and the US Treasury are no closer to solving the underlying problem than they were eight months ago.

The crisis will only end when house prices stop falling and banks stop racking up huge losses on their loans.

Doing that, however, will require the US government to intervene directly in the real estate market to end the wave of foreclosures. Ideologically, it is ill-equipped to take that step and, as a result, property prices will fall and the financial meltdown will go on and on.

Ultimately, though, action will be taken because there will be political pressure for it. Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.

The US has just had its weakest period of expansion since the 1950s. Consumption growth has been poor. Investment growth has been modest. Exports have been sluggish.

But if you are at the top of the tree, the years since the last recession in 2001 has been a veritable golden age. Salaries for executives have rocketed and profits have soared, because the productivity gains from a growing economy have been disproportionately skewed toward capital.