Don't Be So Sure This Will Work

Last night Trichet and other policymakers in Europe basically forced Bernanke's hand, initiating 100% guarantees of interbank lending.

This forced Bernanke to follow suit early this morning, lest the US markets and US credit system implode into a smoking hole instantly.

This was not a position Bernanke was willing to take on his own, or he would have. But when the rest of the world has done it, you literally have no choice, unless you intend to be turned into an instantaneous credit island - an event that the United States would literally not survive.

So the die was cast and Paulson and Bernanke's refusal to endorse this step in the G7 meeting Friday was literally rammed down their throat.

Now, however, we have a new problem.