The Fed and the ECB are carrying out the most aggressive monetary squeeze of modern times. This is colliding with public and private debt ratios that have ballooned to 292 per cent of GDP in rich economies (IMF data) and 247 per cent globally - up by 50 percentage points since the pre-Lehman debt bubble.

This has not yet set off serious credit defaults in the West, though a string of developing states such as Egypt, Pakistan, Tunisia, El Salvador, Lebanon, Sri Lanka and Ghana are in trouble.

Companies stretched debt maturities when money was cheap, giving them a buffer. But the effects of last year’s ferocious tightening have yet to feed through and there are already signs of an incipient credit crunch in Europe. S&P Global says US firms have a weaker credit profile than before the Lehman crisis. “Refinancing pressure is building,” it said.

The standard 30-year mortgage rate in the US has doubled to 6.5 per cent in a year. The Case-Shiller National Home Price index of US house prices peaked last June and has since fallen by 4.4 per cent. This is only the second time since the 1930s that prices have fallen nationally.

A new study by the Dallas Fed says the price-to-income ratio has hit levels never seen before in modern US history. It thinks house prices could fall 20 per cent in the US, with parallel falls in Germany, risking a “domino effect” through the global macro-economy.

Every very relevant measure of the US Treasury yield curve is by now steeply inverted. The benchmark 10-year/two-year spread flipped nine months ago and has dropped to minus 88, the lowest for almost half a century. Recessions typically follow a year or so after the start of sustained inversion. That happened nine months ago.

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The money supply is contracting across the Atlantic economy. The Institute of International Monetary Research says that broad money fell at a 2.1 per cent rate (annualised) in the eurozone over the past three months, by 3.9 per cent in the US, and by 10.3 per cent in the UK. The fall in real terms has been off the charts.

Yes, this is still draining the monetary overhang created by central banks during the QE orgy during the pandemic. But at the end of the day, monetarists of all stripes agree on one thing: this picture cannot be reconciled with a fresh cycle of economic growth and inflation.

It is certainly possible that these traditional indicators are obsolete in the modern electronic economy, but there are reasons why the winter rebound might be an illusion.

Matt King from Citigroup says central banks have added $US1 trillion of short-term liquidity over the past three months. “It’s basically as though they have been doing QE, even as they told us they were doing QT.”

The longer they keep raising rates into the teeth of monetary contraction, the greater the risk that they will break the global economy in the process.

“The moment you think of it in these terms it paints a much more negative and fragile picture for the outlook. What we’ve seen is quite extraordinary, and you shouldn’t be chasing it,” he said.

The reasons for this bizarre twist are highly technical. The Bank of Japan had to splurge on bonds to defend its yield curve control policy.

The US Treasury has been running down its Fed account to keep spending going until there is a deal in Congress on the debt limit. That has neutralised the Fed’s asset sales. But this is nearing limits and will have to go into reverse, at which point it will double the potency of monetary tightening.

It was the blockbuster US jobs report three weeks ago that launched the reflation story. Non-farm payrolls soared by 517,000 in January. “It was so strong, I don’t believe it,” said Mark Zandi from Moody’s Analytics.

Instant data is always erratic at turning points, and nothing is more erratic than payroll data, a lagging indicator even when correct. Analysis by the Philadelphia Fed said the series overstated jobs growth by a million in the first half of last year.

The January report relied on a 2.9 million “seasonal adjustment” that may be wildly wrong in the discombobulated post-Covid labour market, and amid freak US weather. The February report may prove a very cold douche.

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I stick to my unfashionable view that central banks are over-tightening and that the US and Europe are heading towards a serious recession, if it has been postponed by a few months.

What is clear is that the Fed and the ECB have the bit between their teeth. They are trying hard - too hard - to regain lost credibility after letting the inflationary genie out of the bottle. And they are relying on the same lagging indicators that got them into trouble in the first place.

They will certainly break the back of inflation. But the longer they keep raising rates into the teeth of monetary contraction, the greater the risk that they will break the global economy in the process.

Telegraph, London