Fetch your tin helmets once again. The European Central Bank is opting for a monetary purge. So too is the US Federal Reserve, now ruled from Dallas. Ãœber-hawks and Cromwellians have gained the upper hand at the great fortress banks. Whether or not they admit it, both are embarked on policies that must lead to retrenchment across the Atlantic world. The City mood turned wicked as the full import of this policy switch sank in last week. On Wall Street, the Dow’s 396-point dive on high volume late Friday had an ugly feel. ‘There is now the distinct possibility of a simultaneous sell-off in global bonds, equities and commodities,’ said Jonathan Wilmot from Credit Suisse. ‘I would advise Mr Trichet to be more careful in his comments,’ said Spain’s premier Jose Luis Zapatero. The counter-attack has begun. Spain’s property crash is calamitous. House prices have tumbled 15pc since September, say the developers (APCE). Over 98pc of Spanish mortgages are on floating rates, priced off three-month Euribor. This rate leapt 32 basis points to 5.24pc after Mr Trichet opened his mouth. The ECB demarche is ominous for the rest of us as well. We may […]