Buried in a CNBC article entitled “Radical Measures May Be In The Wings” is a line which fairly well summarizes where world central banks stand today:
There’s also a sense that the concept of moral hazard may have become something of a luxury item in the current meltdown.
In other words, so much for all the free markets rhetoric we’ve heard for years, the Fed is now in panic mode and will pull out all stops necessary in dealing with the financial crisis.
Earlier today there was a telling quote from the Italian prime minister:
Italy’s Prime Minister said on Friday there is talk of suspending markets for a temporary period while the global financial crisis is sorted out, but there is nothing concrete in this idea yet.
Asked what European Union leaders might discuss if they meet in Paris this Sunday, Silvio Berlusconi told a news conference: “There is talk of suspending markets for the time needed to rewrite (international finance) rules.”
Berlusconi subsequently reversed his comment and the White House has since denied this rumor, but I’m not buying it. I believe they do have contingency plans to shut down financial markets if things spiral further out of cotrol. Frankly, it would be irresponsible for them not to do such planning.