Navigating in the dark...

Policymakers have so far failed to contain a crisis that began with the bursting of the housing bubble, rapidly spread into the credit markets and is now threatening to bring down employment through recession. The policy failures can be attributed to two related challenges that policymakers face, namely imperfect information and hesitancy to take decisive action.
Fact is that policymakers base their decisions on information that is imperfect in the sense that the information does not provide the full picture of the issue(s) at hand. Most economic indicators, for examples, provide information on the state of the economy of the recent past. A few indicators known as "leading indicators" provide information that gives at least some insight into the future direction of the economy. The most obvious leading indicator is the stock market itself but it is not infallible to the vagaries of, say, bubbles and therefore can at times provide erroneous information.
Basing decisions on imperfect information contributes to a hesitancy to implement policy because "blunt" policy frequently results in collateral damage that is not always known beforehand. A very good example of this is monetary policy. When a central bank decides to cut interest rates in order to stimulate the economy, it also raises the risk of sparking inflation down the line.
The unprecedented nature of the current crisis means that policymakers don’t have much to lean on in terms of experience in order to set the appropriate policy. The approach therefore has to be novel, which introduces even more uncertainty into the equation as these "new" tools have never been tested before and therefore it becomes more difficult to estimate if and what the collateral damage will be. We can therefore expect a lot of hesitancy amongst policyholders (which is what is being observed on the ground), which creates a huge dilemma as the time factor is of essence when trying to contain a crisis like the current one.
No wonder then that despite the government pledges to guarantee bank transactions, the TED spread still remains dangerously wide.