Gautam mentioned the Swedish bailout. It is worth noting that the Swedish bailout did not begin until about 2 years after the financial turmoil: two consecutive years of negative GDP growth and tripling of unemployment. Nevertheless, many are citing the Swedish bailout as a success. Evidently, it is not necessary for a government bailout to be proactive in order to be successful.
Currently, we haven't even had two consecutive quarters of negative GDP growth in the US, and unemployment is up only a percent or two. The lesson I draw is that we would be prudent to wait and see if conditions deteriorate before risking even more than Sweden did (as proportion of GDP) to try to "fix" things. http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?_r=1&oref=slogin Property prices imploded. The bubble deflated fast in 1991 and 1992. A vain effort to defend Sweden’s currency, the krona, caused overnight interest rates to spike at one point to 500 percent. The Swedish economy contracted for two consecutive years after a long expansion, and unemployment, at 3 percent in 1990, quadrupled in three years. After a series of bank failures and ad hoc solutions, the moment of truth arrived in September 1992, when the government of Prime Minister Carl Bildt decided it was time to clear the decks. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
