“The ECB is doing whatever it takes to unclog the interbank market,” said Gilles Moec, from Bank of America, who described the move as “spectacular” volte-face and a belated recognition that the credit crisis is deadly serious.
The monetary blitz was welcomed in Brussels, where EU leaders were meeting yet again, just days after agreeing to the most comprehensive bank bail-out in history. “We are not at the end of the crisis, we are still living in dangerous times,” said Jean-Claude Juncker, Luxembourg premier and Eurogroup chair.
He issued a stark reminder that life is going be very different for the banking elite as governments move to restore the lost discipline of the Bretton Woods financial order and attempt to “civilise” capitalism, the code word for clamping down on the City – dubbed “the Casino” in Europe.
“Let everyone remember after this crisis, who solved it. Politicians did, not bankers,” he said. Mr Juncker added that this episode would have a profound effect on the euro debate in Britain.
“The British prime minister had to beg to be let into the room. I’m sure that when the storm is over, the British will think about whether they shouldn’t become an equal in all decision-making bodies.”
When firms become too large to fail and must be bailed out by forcing debt onto taxpayers, you know something is wrong: capitalism is too civilised already. Once the immediate crisis is over, good reforms would restore sound money and provide regulations which ensure the effectiveness of the market. We need more competition, not more central control.
There are two clear sides to this debate. The centre left think all would be well if only we thought everything through and enforced a thick blanket of rules, preferably on a few large but easily-controlled corporations. The centre right know that experience delivers the greatest wisdom: they know that free competition among many companies, in a market regulated for responsibility, delivers far greater progress than any system designed by the human mind.
There must be regulation; there must be responsibility. One person must be prevented from coercing another and the rules must ensure commitment to mutually beneficial contracts entered into voluntarily. Failed corporations must be allowed to fail, or we will be forced to prop up ever more failures as our economies grind to a halt.
To choose to live in the cathedral or the bazaar? One of these organising principles leads to progress through freedom, the other absolute control and stasis.