This could be the turning point in the global financial crisis (GFC) that began in Fall 2008. Much like the August, when Mexico’s financial crisis (the climax of the long Latin American debt crisis) forced the Federal Reserve to loosen monetary policy, igniting the long disinflationary growth period that ran (with two light interruptions) until 2007.
We might see this soon on a global scale if a market firestorm forces the major Central Banks into large-scale and coordinated action to stabilize the world economy. A change of policy in the ECB would be necessary, as it’s current policy is an incoherent mixture of tight and loose.
If governments remain paralyzed, or attempt to cope individually with a global event, then we might see ugly results. (later addition: Not good to start a recession with weak household balance sheets and 9%+ unemployment).
There will be people cheering for us to lose, advocating inaction with confident assurances that nothing can be done. Let’s hope our leaders do not listen to them. Schumpeter was wrong when he said that “A depression is for capitalism like a good, cold douche.” (Douche in German means “shower”, but it is still bad advice.)
To see the full coverage of the GFC, go to the FM Reference Page Financial crisis – what’s happening? how will this end?