The cash injection from the ECB and Fed worked in the short term. Markets rallied, and then yesterday calmed down.

The markets now need more information. The sooner banks can update shareholders on what their true asset and liability positon is, the better. Markets have to know sometime, and sometime they have to price bank shares based on the true position. If more can be revealed sooner, the adjustment can be made. Assuming all the major banks are still solvent and capable of writing new business, up to date knowledge of their financial position would enable traders in the market to regain confidence so banks can again lend more to each other, and sell on mortgages and other loans they have written. If any bank is too stretched, again it is better that this is revealed and sorted out promptly. If it is not rumours spread, and the uncertainty taints others and prevents business being done.

Markets are stalked by fear and greed. Fear has had a good run for a couple of months now. Fear thrives on lack of information, and on rumours of what might have gone wrong. Fear is always increased by Central Banks raising interest rates.If banks and regulators want more orderly markets they should publish updates and help people quantify the damage so far.Central banks still need to think more about how far they can go in forcing a “re-pricing of risk” without precipitating a major crisis in the real economy. “Re-pricing risk” means lowering the value of many of the loans banks and funds own, which in turn means cutting the amount of money banks have to lend to people in the rest of the economy. Less credit means less business. Less business means fewer jobs. We did

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