Sean O'Grady: Economy's house of horrors has frightened the Bank

Spooked. Though the Bank of England and its Governor, Mervyn King, would never use such indelicate language, it was not just the Hallowe'en experience that has them quaking. The Bank is spooked – shocked might be a better word – by the economy's continuing weakness.

The Bank, like the rest of us, lives in fear of our zombie banks, who can't or won't lend. QE has worked for firms able to access capital markets – but not anyone else. And even with those big firms and banks that have successfully launched rights issues and new bonds (and even a few mortgage securitisations), the funds seem to have been spent on paying off other debts, rather than investing in the "real" economy, buying plant and machinery, hiring people and placing orders with smaller company suppliers, trickling the money down.

Nouriel Roubini, that scary Dr Doom, isn't the first to warn much of the worldwide quantitative easing may simply be creating new bubbles in equity and commodity markets. The Bank's chief economist, Spencer Dale, has hinted as much in the recent past as well.

The credit crunch, in other words, is far from over, and is just one of the big factors – along with our vast debts and over-reliance on the City and housing for prosperity – that will squeeze living standards for years. Even the Bank's moves are unlikely to change that. Indeed there are clues that the British have, against form, acquired an aversion to debt. Fear of unemployment has left many of us unwilling to borrow, no matter how easy or cheap it might be (actually it often isn't, at the retail end of things). So we don't spend, and deflation edges closer. Scary.