Some of you have asked me what I think of the concerted central bank effort to flood European banks with dollars. Ed Harrison noted the Fed is playing it down (no press release, perhaps a fear of treason charges), I believe Roubini viewed it as a hidden forex move.
I find it a striking dilemma and here is why. The blogger in me thinks: “This just postpones all the major decisions. Once the loans are up the banks still will be strapped, and the longer you wait to resolve financial crises, the more they will cost. There is no eurobond and no rapid economic growth at the end of that tunnel.”
If I were Trichet, or some other involved statesman, I would have done what was done, albeit sooner. The statesman in me would think: “This just postpones all the major decisions. But I can’t send everyone to their doom just yet. Maybe there is some way I am wrong and a month or two from now things will look different and we can make another decision then.”
I am never sure how to reconcile these two perspectives. Of course, in real life I am a blogger and not a statesman, for good reasons I might add.
In the meantime, the banks are lobbying the BRICS.