[quote=Allan from Fallbrook][quote=briansd1]Actually, Krugman was right. Bold government action, such as foerign exchange controls, helped Iceland do better than the Baltics.
The same was true with Malaysia during the Asian financial crisis.
Doing something is better than doing nothing.[/quote]
Brian: A post which completely ignores two BIG facts: The Crash of 2008 and subsequent events (including the Eurozone crisis at present) completely dwarf the Asian Currency Crisis, LTCM, etc and “bold government action”, which did stabilize events in 2008, is now a game of diminishing returns, largely because the respective governments and central banks (Fed and ECB) are running out of bullets.
Interest rates have been slashed, various stabilization programs and policies have been enacted and trillions of dollars and Euros have been pumped into the respective economies, financial systems, etc and we’re now approaching a point where there will be no bullets left in the gun.
It’s now a matter of remorseless logic that interest rates cannot fall below zero, more quantitative easing/liquidity is failing to turn things around and, at some point, what must happen will happen.[/quote]
IMHO, the stimulative measures didn’t work (and will have negative consequences in the long run) is because they never correctly identified the problem. They were operating under the assumption that there was a liquidity crisis. Nothing could have been further from the truth. We have a *solvency* crisis, and that demands a totally different set of solutions
Their “fixes” have exacerbated the problems (wealth and income gap is at levels that cannot be sustained, and this is the core of our problems), and they have saddled us with even more debt — especially govt debt — when what we needed was debt default and tax/trade reform..
