ECB Trichet's comments show central banks' delicate balancing act

In other words, every time anyone, anywhere tries to inject a little sanity into the mix, Wall Street threatens to hold its breath until we all turn blue.

Just exactly when might these undoubted paragons of fiscal responsibility decide WOULD be a good time to "withdraw liquidity measures"?

Like dopers with their junk, the unforced answer is:

Never.

?? What is the difference between what J.C. had to say and the repayment of TARP? The idea of capitalism is for private investment to fund private investment and having governments withdraw is right in line with Mr. Smith. What Trichett had to say is probably little more than a precursor to things that WILL shake markets. Now that the Lisbon accord is history and the EU has a pres I expect that some tightening of the purse strings in the way of some very stringent bank regulations is not far away. The old hawk has been talking about it for some time and I doubt that he has changed his mind.

Bill --

You're right on, as usual. But the central problem still remains:

a.) The major players are "too big to fail".

b.) To forestall any corrective action, they need only say that it will cause them to fail (which it has been already agreed in principle must not be allowed to happen), and send stocks tumbling precipitately to prove it.

c.) Itso fatso (as ol' Archie Bunker used to say), any contemplated tightening of purse strings is subject to the approval of the very group those purse strings are being tightened against; there is at present no governing body with sufficient clout to counter Wall Street's threat to pull the world's plug if it doesn't get its own way.

So I second your post, with the slight proviso that any tightening of purse strings can only be predicted at this point as being 'attempted'. If the EU can't bring enough bat to the plate, Wall Street may very well strike 'em out looking.

I suppose if you have a mattress stuffed with piles of cash, or loads of cash in the bank and little or no debt, you would be all for a strong anti-inflationary monetary policy. The rest of us will be better served if we avoid tumbling into the deflationary abyss, even if to do so we experience a return to a period of inflation. Tightening the monetary screws too soon and too fast is simply not a viable option unless we prefer to see what a depression really looks like. http://jpetervanschaik.googlepages.com

PS to Mr. Lindblad:

I consider any TARP repayments to date to be in the nature of those 'dividends' Madoff used to periodically kick back to his 'investors': A necessary pay-out to ensure enough confidence for the over-all scam to continue.

PS to Mr. Lindblad:

I consider any TARP repayments to date to be in the nature of those 'dividends' Madoff used to periodically kick back to his investors: A necessary pay-out to ensure the confidence required to keep the larger scam going.

Generals tend to fight the previous war. We can hope the central bankers of the world aren't going to make the same mistake. http://www.scribd.com/doc/19819759/Inflation-Isnt-a-Four-Letter-Word

clikdawg:

What I am seeing with the EU mirrors the U.S. at our inception - 12 States. No, I am not wrong. R.I. told them to (you choose, but today we call it by the initials F.O.) We also have a modern saying about "paybacks". Isolation quickly made it 13. High school history books are quirky about things that less than nice. Anyway - it took them (over there) around 8 years of bickering to sign the Lisbon pact/accord, or whatever they call it. Basically, they now have a Prez and Sec. of State to go along with the EU parliment, the equiv. or congress. You can go check all the rest if you like, but they got rid of tolls,checkpoints and went for a single monetary system. What does this look like to you? As individual countries their GDP is not all that big on the world stage. Combined, its good size and this union continues to enlarge. It has a long way to go to catch up with the U.S., Japan or China, but the Euro may well be a future contender for the position of the dollar. They have lots of problems over there too including unemployment, immigration and water shortages, but they don't have the banking problems on the same scale as the U.S. Right now the dollar seems to be in rebound and getting stronger. I think that the EU is going to put in place policy of larger reserves for the banks and most likely more stringent lending guidelines. I don't see were lending money in foolish venture improves an economy?
All moves on their part will be to keep the Euro strong and they will be exporting tourists - over here - to buy more of the U.S. on the cheap.
Check on our trading partners - back before China (pre 1980) and you will get the concept. The Chinese do not own most of our grocery stores.

Prevailing wisdom says China will rule the economic roost as the US dollar sinks to lower than worthless but we all know how accurate prevailing wisdom tends to be. It wasn't that long ago we heard the same thing about Japan. Yes, the EU has a few snags and a some potential problems but I still think the Euro has the upper hand when it comes to replacing the US dollar, at least in my lifetime.