BIS central bankers’ speeches  3  was striking how little some of the Troika staff seemed to appreciate that over-indebting the Government in order to recapitalise the banks could be counterproductive. A national banking system will not long be healthy if the Sovereign’s finances are shaky: this has been known for centuries!
Second, the scale of asset buying we do should follow from a clear sense of why markets have been malfunctioning. I’ll distinguish between liquidity and sustainability problems. Central banks can provide liquidity, while challenges like fiscal sustainability are best dealt with elsewhere. Third, we need more clarity around the mechanics of central bank asset purchases, quantitative easing (QE), and the ‘zero lower-bound’.