Cœuré: You are absolutely right, central banks around the world – the Fed, the BoE, the BoJ, and we at the ECB – have injected so much liquidity into the markets that we have suppressed price mechanisms to some extent. But this period will end. Market participants must learn to price risks correctly again.
And they have to get used again to the idea that markets can go both ways – up and down. The tapering discussion and the turbulence seem to suggest that this learning process might become very difficult. Nagel: Financial markets always have a tendency to overshoot the mark a little bit.