In a sign of the harm that tumbling markets are doing to the global economy, calls multiplied on Tuesday for a concerted campaign of bold policy-making to stop the rot.

Globally coordinated asset purchases, debt relief for under-water U.S. home owners, a cut in euro zone interest rates and a reduction in Chinese banks' required reserves were just some of the ideas aired to cut the negative feedback loop of a 10-day slide in world share prices that has fanned fears of a new recession.

We're in a situation where sentiment is so very badly damaged that everything should be on the table in terms of policy options to tackle the crisis, said Mark Cliffe, chief economist at ING Bank in Amsterdam.

Almost anything is worth a try, he added.

The obstacles to a policy grand bargain are well known. Interest rates in many countries are already near zero, while governments are under market and political pressure to borrow less, not more.

China has no appetite to let the yuan rise, which would stoke export-led growth in the United States and elsewhere. In Europe, critics blame the European Central Bank and Germany for deepening the euro zone's debt crisis by opposing radical proposals to bail out indebted members of the bloc's periphery.

It is a measure, then, of the sudden deterioration in global growth prospects that economists are urging policy makers to think outside the box to get round these constraints and make good on their repeated promises to cooperate to ensure financial stability.

Should we be dished up half-hearted and lukewarm measures, the markets will give a decisive thumbs-down and central banks will be pressed to do more later -- in less favorable circumstances, said Paul Mortimer-Lee, global head of market economics at BNP Paribas in London.

WAITING FOR THE FED TO LEAD

All eyes for now are on Tuesday's policy meeting of the Federal Reserve. The consensus is that the U.S. central bank will not launch a third round of asset purchases -- quantitative easing (QE) in market jargon -- but could well lengthen the maturity of its government bond holdings and reinforce its pledge to keep monetary policy ultra-loose for much longer.

Mortimer-Lee said such an outcome would be worthy but insufficient. What is needed, he said in a note, is coordinated QE from the United States, Britain, the euro zone and Japan to increase liquidity and stimulate demand for risk assets.

Keep markets awash with cash is always a priority for policy makers when markets are stressed. If banks hoard money and refuse to lend to each other, the wheels of the economy can grind to a halt.

To that end, Mortimer-Lee said overnight money market rates should be allowed to fall below central banks' official policy rates. He also advocated joint central bank intervention to prevent a further destabilizing rise in the Japanese yen and Swiss franc.

Harvard University economics professor Kenneth Rogoff agreed that both the Fed and the ECB ideally would adopt expansionary policies to keep exchange rates on an even keel.

Writing in the Financial Times, Rogoff also advocated very large debt write-downs in the smaller countries on the edge of the euro zone combined with a German guarantee of central government debt in the rest. In the United States, a scheme was needed to write down mortgages that surpass the value of the homes they are financing.

If political obstacles rule out direct debt reduction, excess debt now shackling the global economy could be partly inflated away by targeting inflation of 4-6 percent for several years, he argued.

NO QUICK FIX

John Wadle, a banking analyst at Mirae Asset Securities in Hong Kong, said he backed the thrust of Rogoff's comments. What markets needed, though, was a concrete commitment by Fed Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner to tackle the debt overhang using the Fed's balance sheet and regulatory sticks and carrots.

Bernanke and Geithner need to jointly make an announcement of a coordinated set of measures to rebuild confidence and economic fundamentals, Wadle told clients. A Fed press statement at this point would fall short.

Desperate times call for desperate remedies. But not everyone agrees that it is time to press the panic button.

Economists at Bank of America Merrill Lynch said their measures of financial stress are rising but are not as elevated as during previous market slumps. So the urgency for the Fed to ease is not as great.

And some seasoned market-watchers are convinced that there is little policy makers can do in any case in the short term to redress what are deep-seated global imbalances in savings and investment.

Charles Dumas, chief economist and chairman of Lombard Street Research, a macroeconomics forecasting consultancy in London, is convinced the world is headed for recession in 2012 because countries with excess savings are doing too little to consume and import more from economies such as the United States that need to save more.

Japan had tried and failed for 20 years to stoke domestic consumption; hopes that China would switch its engine of growth to homegrown demand were similarly fanciful, Dumas said. But the greatest measure of blame attached to Germany, he argued.

You can produce fancy economic solutions until you are blue in the face, but they won't work until Germany gets out and starts spending, Dumas said. And they won't do it.

(Reporting by Alan Wheatley; editing by Ron Askew)