QOTD: What Coordinated Central Bank Action Means . . .

Today’s quote squares nicely with something I had mentioned yesterday, that the rescue plan “could be looked at as awful news — more economies and banks in such dire straights as to need yet another central bank bailout, moral hazard notwithstanding.”

It is unusual to have our quote come not from the body of an article, but from the headline, via this Telegraph article:  “Central Banks do not take this kind of action unless something is up.”

Here’s the Telegraph:

“Three years to the day since Lehman Brothers went under, taking the global economy with it, the Bank of England and its counterparts in America, Europe, Japan and Switzerland went and put on a proper show…There’s a difference too, this time around. The central bankers have learnt one lesson. Back in 2008, they waited for Lehman to collapse before they turned on the financial gushers. At least this time they’ve acted before liquidity dries up and the whole global banking system gums up.

Even so, it’s hard to see their intervention as offering anything but short-term respite. That’s because the real problem in the eurozone is not banking liquidity, but sovereign solvency.”

Think about that. Consider the TARP rescue, how Bernanke and Paulson had to scare the congressmen to death to get them to take action. Now consider that in light of what must be going on behind the scenes to get this announcement of 5 Central Banks coordinated intervention.


Financial crisis: central banks do not take this kind of action unless something is up
Alistair Osborne, Business Editor
Telegraph 11:00PM BST 15 Sep 2011   

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