With a credit crunch in the Eurozone looming and ECB President Mario Draghi passing the buck to EZ governments and the EFSF to do the rescuing themselves, I find the words of former IMF chief economist Simon Johnson, writing in 2009 in the Atlantic Monthly, salutary:
In a financial panic, the government must respond with both speed and overwhelming force. The root problem is uncertainty—in our case, uncertainty about whether the major banks have sufficient assets to cover their liabilities. Half measures combined with wishful thinking and a wait-and-see attitude cannot overcome this uncertainty. And the longer the response takes, the longer the uncertainty will stymie the flow of credit, sap consumer confidence, and cripple the economy—ultimately making the problem much harder to solve. Yet the principal characteristics of the government’s response to the financial crisis have been delay, lack of transparency, and an unwillingness to upset the financial sector.Of course, he's referring to the US Treasury and the Fed in 2008/2009, but it describes the Eurozone and the ECB even better.
Thus we now have two deadly sins of central banking: ongoing monetarizations of government deficits, and failure to decisively prevent a financial panic. Looks like we are going to get two for the price of one.