The speed at which settlement systems were put together again was truly impressive, yet there are no signs so far that this money is to be withdrawn. Back in the days of the anti-millennium bug exercise, it was several months before the central bank asked for its cash back. It may be even longer this time around. By all accounts business has fallen off a cliff in the US. New York department stores are reporting a 40 per cent drop in sales while theatres are going dark all over Broadway. Nobody is using the ubiquitous yellow cab anymore – or at least not in the numbers that New York cabbies need to stay afloat. The chances of avoiding negative growth this quarter look pretty much zero.The shock will subside and buying patterns will return to normal, but it is worth reflecting upon the longer-term effects this action by the Federal Reserve Bank will have upon the economy and thus the stock market. On this occasion I cannot imagine Mr Greenspan will be too upset if some of the surplus liquidity injected into the banking system does find its way into financial assets.At the moment the biggest buyers of the stock market seem to be companies themselves, taking the opportunity of the downward spike to buy their own equity.

While there has been no widespread selling of shares by private investors, they have yet to feature much in the buying lists either. Yet savings and personal wealth will have contracted hugely as a consequence of the fall-out in markets, which could curb people's willingness to spend. The authorities will be hoping that cheaper money – and more of it – may redress the balance sooner rather than later.But printing cash is not usually good for your financial health This is how inflationary spirals start to build momentum. Inflation has been relatively subdued in America, despite the strong growth of recent years. Restoring economic prosperity, even to close trendline growth at around 2 per cent, by pumping money into the system is quite likely to have the effect of pushing up the cost of living. While this would normally be fought by increasing the cost of money, this option will be available only if both the economy and the equity market are in a more buoyant mood.

It may take several months to achieve this, so do not rule out inflation rising on the other side of the Atlantic.Bond markets are already anticipating this. The yield curve has steepened, so 30-year Treasuries now deliver significantly more than short-dated paper. It was not so very long ago that America, rather like this country, had a downward-facing yield curve, due to healthy tax revenues allowing the central bank to retire debt. How swiftly things can change.Of course, inflation is unlikely to become anything like the problem it was in the UK, even as recently as a decade ago. But we would do well to remember that inflation, even in the 4 to 5 per cent range, is bad for bond markets. It could mean we are entering a period when boom and bust return as regular features.

So much for the brave words of our own Chancellor, who clearly felt that, by granting independence to the Bank of England, he could eliminate the traditional cycle. He had not reckoned with this country joining the US and going to war.A little bit of inflation may be a small price to pay for restoring confidence, if indeed that is the achievement of the Fed. Over here we can be reassured that our own economy appears to have been more buoyant than we thought, while institutional liquidity is at its highest level for many years. In some measure that reflects the fact that equity markets have tumbled, so cash is bound to represent a greater proportion of institutional wealth.But it is an encouraging statistic nonetheless and shows there are potential buyers out there, even if the insurance market still looks as if it will have to be dumping equities to meet the demands the current crisis will have placed upon it.It is still too early to be sure we have turned the corner or, indeed, that the bottom has been reached. The FT Actuaries All-Share Index yield rose above 3 per cent last week for the first time for many a year.

The p/e multiple – a little over 17 – no longer looks so demanding. But that will rise if profits contract during the second half of this year – as they almost certainly will Buyers will need to be brave. They may also need to be patient.Brian Tora is Chairman of the Gerrard Asset Allocation Committee.. terry.bond hemscott MoneynetThose of us who pontificate about shares on a regular basis face a quandary these days. Do we imitate the ostrich and urge our followers to go out and buy because there has been an over-reaction in certain sectors? Or do we continue to counsel extreme caution because there is the threat of war and therefore the worst is yet to come? On the basis that there are no right or wrong answers to the conundrum, I have sought the opinions of people I respect and, for a bit of fun and to put them on the spot, given them a fictitious £50,000 to invest immediately.Peter Reynolds, a friend from schooldays, is chief executive of Wilshaw, a FTSE Fledgling company that has been having problems lately.