The coming crisis is as much about bad bets as bad debts.

This afternoon, Mervyn King shocked the media (and most of the City) by dampening down expectations of an interest rate rise.

Earlier this week, Ben Bernanke seemed equally stony-faced about the likelihood of cutting back on QE2 – despite the fact that any economic benefit has been long outweighed by the expenditure involved….given the obscene size of the US debt.

Much of the Democratic-supporting US press comment starts from the assumption that Bernanke is a rigid academic incapable of appreciating that his strategy isn’t working.

In turn, UK business press attitudes towards Mervyn King have tended to accuse him of complacency in waiting for a recovery that almost certainly isn’t going to happen.

But there is a very good chance that  the media commentariat are mistaken about what the two men’s central banking strategy is.

In the EU, both Brussels and the ECB have stressed very strongly how important bigger liquidity/capital ratios are for the Eurobanks. Largely on this basis, Deutsche Bank hurriedly absorbed Deustche Post in order to provide that liquidity as quickly as possible.

The general run of bankers is, let’s face it, arrogant, greedy and stupid. But whatever else you might accuse Bernanke, King and Trichet of, you wouldn’t charge them with that. Otherwise, they wouldn’t be central bankers.

No: the first description that would come to my mind is ‘devious’. To be honest, I think it comes with the territory.

Why is Bernanke sticking with QE despite the growing US debt? Why is King persevering with Zirp despite rising inflation? Why is Trichet in such a hurry to get bank liquidity ratios up?

Because – once again – they need to protect those banks who have made very big and very bad bets.

FIND OUT WHY IN A SPECIAL SLOG ANALYSIS TOMORROW