Final Word from Tuesday, January 3, 2012

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Banks used to build marble palaces to give the illusion that the money they createdout of thin air had intrinsic value. It worked as long as maintaining confidence in thesystem was always the priority. Only rarely, such as before the weekend takeover ofIPB in 2000, did officials intentionally provoke a run on a bank. All it took with IPBwas a little push, because the bank had been managed so poorly that it had alreadynearly lost its right to the public's confidence. The European and American financialmarkets are in a similar state today. All it would take is a little nudge, because thecredibility of the system has been pushed to the very edge. It's technically true, as FinanceMinister Miroslav Kalousek said on Czech Radio yesterday, that we're facing acrisis of confidence in the financial markets. But it is much more than this, because officialshave renounced their duty to do what is necessary to deserve that confidence.