Jackson Hole may be a central bankers’ conference, but the most important thing to come out of this year’s gathering had nothing to do with central banking policy.

Christine Lagarde has said publicly what most policymakers have avoided addressing since the crisis began. Using her new bully pulpit at the International Monetary Fund she has conceded that the common problem facing the developed world is an excessive overhang of claims on debt that financed worthless investments. These claims will have to be liquidated, and the quicker the better.

Ms Lagarde deserves praise for spelling out the problem and issuing a call to action. But to resolve it also requires policymakers to decide where the losses should fall. She thinks they should land on taxpayers; this is wrongheaded. She focused on two big risks: the continuing frailty of European banks, and the continuing house price falls in the US and the growing number of homeowners trapped in negative equity.