I have mentioned before the superb John Mauldin free economic newsletters.

Sign up, if only to read his latest masterpiece which praises the European Central bank for trying to stop the European Union falling into a very deep abyss.

What’s so good about John’s work is that it combines professional insight with a clear, direct and slightly ‘folksy’ style which the Americans do so well:

A collapse of a major European bank could trigger all sorts of counterparty mayhem in the US banking system, at least among our major investment banks. And then people would want to know which bank was next.

This is yet another reason why the recent financial-system reform was not real reform. We still have investment banks committing bank capital to derivatives trading overseen by regulators who don’t really understand the risk. Who knew that AIG was a counterparty risk until it was? Lehman was solid only a month before until it evaporated.

On paper, I am sure that every one of our banks is solid – good as gold – because they have their risks balanced with counterparties all over the globe and they have their models to show why you should go back to sleep.

And that is why I applaud the ECB for stepping in and taking some risk off the table. We do not know how close we came to another debacle. Does anyone really think Jean-Claude Trichet willingly said, "Give me your tired, your poor, your soon-to-default sovereign debt?" Right up until he relented he was saying "Non! Non!"

He did it because he walked to the edge of the abyss and looked over. It was a long way down. Bailing out European banks at the bottom would have cost more than what he has spent so far. It was, I am sure, a very difficult calculation…

Which is why he has a million subscribers. A classic example of the value of offering a fine product for free and getting other paying work from the ensuing mass enthusiasm?