Then one has to worry about the adjustment process towards a new ‘steady state’, and second, about reducing the probability of similar crises occurring in the future. This means that we are simultaneously in a situation where we need to ensure that the patient will survive, but the risks associated with the medicine will also be under control.
The dilemma here is again on the appropriate doses: How to facilitate and speed up the adjustment while minimising the risk of ‘curing the disease and killing the patient’? And how can we smooth the adjustment without sowing the seeds of the next crisis? In other words, how can policy avoid tail risks? And at what cost?