Ambrose Evans-Pritchard is almost shrill in his assessment of the choices now being faced by Fed Chief Ben Bernanke – a few vocal Fed hawks and a deficit-wary Congress on one side and, on the other, a slowing economy where the de-flation peril grows everyday.

Federal Reserve chairman Ben Bernanke is waging an epochal battle behind the scenes for control of US monetary policy, struggling to overcome resistance from regional Fed hawks for further possible stimulus to prevent a deflationary spiral.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed’s balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.

“We’re heading towards a double-dip recession,” said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. “The party is over from fiscal support. These hard-money men are fighting the last war: they don’t recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again.”

Mr Bernanke has fought off calls from FOMC hawks for moves to drain stimulus by selling some of the Fed’s $1.75 trillion of Treasuries, mortgage securities and agency bonds bought during the crisis. But there is little chance that he can secure their backing for further purchases at this point. “He just has to wait until everybody can see the economy is nearing the abyss,” said one Fed watcher.

Ambrose ends with Societe Generale uber-bear Albert Edward’s take on the current situation that the world is collectively “walking on deflationary quicksand”.

Oh Dear! We’re heading toward another abyss!