Under these circumstances, there was a likelihood that a number of credit and interest rate markets would experience extreme price moves and possibly cease to function for a period of one or more days and maybe longer. This would have caused a vicious cycle: a loss of investor confidence, leading to a rush out of private credits, leading to a further widening of credit spreads, leading to further liquidations of positions, and so on. Most importantly, this would have led to further increases in the cost of capital to American businesses. Let me be clear: had we not just experienced in August precisely this type of shock to our credit markets, had we not just seen a sudden, world-wide straining of investor confidence, had there not already been underway a flight of capital away from private credit and into Treasury securities, were much of the world not experiencing financial strain, then our judgements about the risks to the American economy of an abrupt and disorderly close-out of Long-Term Capital may well have been different. But, in the circumstances that did in fact exist, it was my judgment that the American people, whom we are pledged to serve, could have been seriously hurt if credit dried up in a general effort by banks and other intermediaries to avoid greater risk.
Svein Gjedrem: The outlook for the Norwegian economy Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), for Norges Bank’s regional network, Region East, Oslo, 25 September 2009. *  *  *  Please note that the text below may differ slightly from the actual presentation. The speech is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 23 September and Monetary Policy Report 2/09. It has been a year since financial turbulence developed into a full-blown crisis. The result was the most severe downturn in the global economy since the Second World War. Key rates were set at historically low levels both in Norway and abroad. Government spending has increased considerably to support demand for goods and services. Global economic activity is now picking up, albeit from a very low level, and unemployment is high. Financial market conditions have improved, although liquidity remains tight in many markets. The financial crisis eroded confidence in banks, counterparties and contractual partners. Access to export credit came to a halt, international trade slowed sharply and manufacturing sales stalled. With financial markets improving over the past six months and an increase in the credit supply, global trade is now picking up slightly. Manufacturing output has recently increased in the US, the UK, Japan and many emerging economies, while it continues to fall – albeit at a slower pace – in Sweden and the euro area.