Liquidate, liquidate, liquidate was the mantra in the early stages of the Great Depression. During the current crisis, the mantra has been liquify, liquify, liquify. Policy makers have sought to avoid the mistakes of the 1930s by flooding the financial system with money to support asset prices, protect bank balance sheets and prevent deflation. But if debts incurred during the boom ultimately prove unsustainable, sooner or later the losses will crystallise.

Choosing who takes the pain is the problem dogging the eurozone as pressure mounts on Portugal to accept a bailout. Despite last weekend's deal to expand the size of Europe's emergency lending facilities and lower the interest cost on bailout loans, the market still believes a restructuring of Irish and Greek debt is inevitable. Greece's 10-year bonds yield 12.7%.