As most people will have seen, Lehman Brothers, the US bank, has filed for bankruptcy. This has sent the money markets into financial turmoil and forced the Bank of England to pump £5bn into the market, while the European Central Bank contributed 30 billion euros.
My question is, how much do we, the public, understand all of this? I was half-listening to this news story on the radio, and began wondering - how does the system actually work? If markets are supposed to work on the principle of free trade, why the cash injection from the central banks? Will they get it back? And how on earth did they have all this spare money available anyway? And is this really the best way to run the global economy?
Any economists here who can explain it all?
My question is, how much do we, the public, understand all of this? I was half-listening to this news story on the radio, and began wondering - how does the system actually work? If markets are supposed to work on the principle of free trade, why the cash injection from the central banks? Will they get it back? And how on earth did they have all this spare money available anyway? And is this really the best way to run the global economy?
Any economists here who can explain it all?