Jean-Claude Trichet

Financial crises have been a recurrent feature of human history. Let me take you back over two millennia in Europe to see how the great historian Tacitus described the financial crisis that hit the Roman Empire in the year 33 AD. In the Annales, he wrote:

“The destruction of private wealth precipitated the fall of rank and reputation. At last, the emperor interposed his aid by distributing throughout the banks a hundred million sesterces, and allowing freedom to borrow without interest for three years, provided the borrower gave security to the State in land to double the amount. Credit was thus restored, and gradually private lenders were found.” ^[1]

Replace “emperor” with “governments and central banks”, “sesterces” with “dollars” or “euro”, “security” with “collateral”: this two thousand year old quotation could sound surprisingly familiar.

At one time the Bank of England and the Federal Reserve decided to embark on ”quantitative easing”, namely the purchase of public bonds in order to supply as much liquidity as possible to the market. What we are doing at present is totally different. We will withdraw all the additional liquidity that we supply.