Ben Bernanke might as well have tried to reason with a roomful of toddlers on a sugar high.
At Wednesday's Federal Reserve press conference last week, he explained, in the moderate tones of a parenting manual, his plans to gently withdraw the markets' comfort blanket. They responded with a full-blown tantrum.
It has almost become a cliche that the "exit strategy" from central banks' unprecedented bonanza of quantitative easing will be fraught with danger, but last week's events – with markets thousands of miles from New York plunging – underlined the fact that global financial stability is at stake.
Even viewed purely through a US lens, Ben Bernanke and his colleagues have a formidable task in judging when the economy is strong enough to withstand a gradual withdrawal of the supply of cheap money that has pumped up bond and stock markets, keeping borrowing costs low and optimism high.
He has made it clear that his focus in deciding when to start "tapering" the Fed's $85bn-a-month programme of bond purchases will be progress in reducing unemployment: he hopes to begin the tapering by the end of this year, and phase it out altogether some time in 2014.
But the US jobless rate is a tricky indicator: unemployment has been kept down over the past year by large numbers of discouraged workers leaving the workforce altogether. Analysts are divided about whether this will be reversed when the economy recovers, as a reserve army of workers picks up many of the jobs created, limiting the decline in the unemployment rate. That makes it hard to guess when the 7% rate at which Bernanke says tapering is likely to start will be reached – and almost as hard for markets to predict how he will respond if it takes longer than he hopes.
If the markets get ahead of themselves, selling off bonds too aggressively and pushing up yields, that would drive up borrowing costs across the economy – including the cheap mortgages that have been key to the housing revival – and choke off the recovery before it can get under way.
But there will be an ever-present risk of the markets over-reacting: like toddlers, they don't deal in nuance. Bernanke's final six months or so in office – an apparently casual remark by Barack Obama last week suggested he was unlikely to reappoint the Princeton professor – will be an all-but-impossible balancing act.
And as Thursday's sell-off showed, global financial markets will rapidly transmit the mildest hint from the Fed that the days of cheap money are over.
The Asian crisis of 1997-8 – which began in Thailand, and led to several countries turning to the International Monetary Fund for bailouts, many in deep social and economic distress – resulted partly from a tightening of Fed policy, which brought to a halt a period of cheap borrowing and lavish foreign investment, and unmasked the "Asian economic miracle" as a mirage.
Many emerging economies are in a much healthier state today: they have large foreign exchange reserves, and are less likely to have hefty debts denominated in foreign currencies – a key factor in 1997-8, as many currencies depreciated rapidly against the dollar.
Yet allowing foreign capital to flow freely into – and out of – emerging markets is still the norm, and it is tough for any government to manage a "sudden stop", because the supply of cheap money investors have been gambling with dries up.
A rapid increase in bond yields across the world, which was one of the symptoms of Thursday's rout, could also have a dramatic impact on countries that are heavily reliant on foreign investors to fund large deficits – not least Turkey, which is already in the grip of a political crisis. One of the key triggers for turmoil in peripheral eurozone economies in recent years has been a sudden jump in governments' borrowing costs.
Andy Haldane, executive director for financial stability at the Bank of England, highlighted precisely this risk in outspoken evidence to the treasury select committee recently: "Let's be clear. We've intentionally blown the biggest government bond bubble in history. We need to be vigilant to the consequences of that bubble deflating more quickly than [we] might otherwise have wanted."
Thursday's worldwide panic was just a taster of how that might unfold.
It cannot help, either, that a withdrawal of stimulus would take place against the background of a looming credit crunch in China, and another massive and untested foray into quantitative easing in Japan, as part of the "Abenomics" policy.
The Fed's plan is fundamentally a sign of optimism: the US recovery looks reasonably firm, the housing market has bounced off the bottom and firms are hiring. But many analysts fear Bernanke's latest forecasts – 2.45% GDP growth this year; 3.25% in 2014 – may prove too optimistic, even without the market-induced turmoil in emerging economies hitting prospects everywhere.
Alan Greenspan reversed course and cut rates in 1998, as the ripples from the Asian crisis – including plunging demand for commodities such as oil – spread around the world. In 2013, too, the consequences, and risks, of the Fed's actions will spread far beyond America's borders. And like even the most patient parent of a fractious two-year-old, Bernanke may find he has unleashed forces he can't control.
guardian.co.uk © Guardian News and Media Limited 2010