The former is clearly desirable, whereas the latter only sows the seeds of later and more costly crises. Nonetheless, my clarification of these principles should aid understanding of the ECB’s response to financial turmoil in recent months. But before coming to this issue, allow me to reflect on the roots of the recent financial turmoil.
After all, it is only by understanding the causes of the turmoil that we can develop and calibrate the appropriate response. 3. What are the roots of the recent financial turmoil? The current money market turbulence observed around the world has its roots in the disintermediation of credit that has taken place since the 1980s.