The large-scale interventions of the central banks to prop up liquidity last week raise difficult questions. Were they right to do so? Did the central banks – especially the European Central Bank, which alone pumped more liquidity into the system than all other central banks combined – not over­react? Do these interventions create the seeds for future crises in the financial system?

Banks are at the centre of the payment system. When, for whatever reason, the payment system is disrupted the economy is bound to suffer. Trade and investment will be hurt. Sound banks and enterprises will be pulled down by an avalanche of defaults.