The Bank of England solved this problem by 1866, and never suffered another liquidity shortage crisis.
FORBES: Let It Be Known That No Financial Crisis Was Ever Caused by Stable Money
But it would also spur a fresh round of deposit flight from banks, worsening the liquidity shortage that has made the recession so harsh.
The joint operation, which also involves the Bank of Canada, was a sign that the ECB philosophy, to be generous in times of liquidity shortage, is gaining traction.
The U.S. never had another liquidity-shortage crisis after 1907, but the dollar remained linked to gold until 1971.
FORBES: Let It Be Known That No Financial Crisis Was Ever Caused by Stable Money
In U.S. history, there were also a number of liquidity-shortage crises, with the last in 1907 serving as the impetus for the creation of the Federal Reserve.
FORBES: Let It Be Known That No Financial Crisis Was Ever Caused by Stable Money
The argument for easier money is that a shortage of liquidity is causing an unnecessary decline in economic output.
FORBES: Monetary Easing Has (Almost) Nothing To Do With Deceiving Consumers
There's no shortage of liquidity to fuel the economy--and the stock market.
Mr. Chidambaram also said that he expects the central bank to take steps to address the shortage of liquidity in the banking system when it meets to review its monetary policy Tuesday.
We note the sharp contrast with 2001, when a shortage of dollar liquidity (strong and strengthening dollar, high real interest rates, low central bank dollar reserves, falling gold and commodity prices, rapidly shrinking U.S. profits) all spelled weakness.
"In the unlikely event that a generalised shortage of offshore renminbi liquidity emerges, the Bank will have the capability to provide renminbi liquidity to eligible institutions in the UK, " he said.
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