The Independent: Central bankers fire off their last cannon- Jean-Claude Trichet of ECB only banker who seems to know what to do - by Jeremy Warner

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Central bankers fire off their last cannon- Jean-Claude Trichet of ECB only banker who seems to know what to do - by Jeremy Warner

There are only two things that need to be understood about money. One is its cost and the second is its availability. As the credit crisis grinds on, central bankers have been doing their utmost to help out on the first of these two determinants by cutting interest rates. Unfortunately, these actions don't yet seem to have helped ease the crisis. As long as there is a problem with the availability of money, central bankers can cut rates all they like, but it won't persuade bankers to lend. Likewise, the various attempts to provide the markets with the liquidity they crave don't thus far seem to have done much good either. To the contrary, the credit crisis has grown worse in recent weeks. Sentiment has again deteriorated sharply with the differing modes of operation applied by central bankers having little impact on spreads or money market rates. Is the advent of "coordinated action" by five of the world's leading central banks likely to fare any better? This is big stuff. Coordinated action is a once every five-to-ten-year event and it only happens if policymakers are truly panicked. That's why markets were unsure whether they should be relieved or alarmed that the G7 has come riding over the hill in this way.

Will it work? Central bankers have now fired off their last cannon, so we had all better hope it does. There hasn't been a banking crisis quite like this one in decades.