Sweden followed a more sensible course of action, though. They fully nationalized the banks, kicked out the top management, wrote off the bad loans and then re-privatized the banks a few years later.
>The sad truth, to me, is that we are responsible because we make our governments spend too much money.
Our governments do not "spend too much", the main economic problems we have are too much bad debt (leading to zombie banks), an excess of fraud in the financial sector and not enough economic activity as a result, resulting in high unemployment.
A government can never spend too much money (it is created with a few strokes of a computer keyboard). They can only spend beyond the limits of the economy's capacity. Right now almost every western economy is operating way under capacity, which is obvious if you look at almost any metric from inflation to employment to inventory.
The government spending more would actually help, although what we really need is for the banks to start writing off bad debts - which they don't want to do because then they would be insolvent.
A strange point of view. From mine, a government is generally a very bad spender and investor. Also, I prefer democracies were the power (money?) is in the hands of the citizens.
By the they spend too much, I meant that they have the tendency to throw money at problems to gain time instead of fixing things and having a vision.
I understand this point of view lies in the political territory though.
I agree with your point about sweden. Also sweden said to the banks, you can either go into our programm or we wont help you, guess what many did not want to be nationalized. Another way to get ride of management would be to let them fail.
The US just gave money to every bank, in order to 'put trust back into the system', so no bank was afaid others would default on there loans.
My understanding is that it was widely discredited before the financial crisis, back when economists thought they actually understood economy and that economic crisis were a thing of the past. Then reality happened, and it seems that US government spending has kept the economy going to the dogs. On the other hand, looking around in Europe, I don't manage to find a single country where austerity measures appear to have produced anything than deeper recession.
> My understanding is that it was widely discredited before the financial crisis, back when economists thought they actually understood economy and that economic crisis were a thing of the past.
Keynsiansm thrown away for a reason. Just because we still dont know anything better is no reason to belive that keynsiansm is right.
Thats like saying COBOL is the best language because we have figured out that Java is actually not that good.
> Then reality happened, and it seems that US government spending has kept the economy going to the dogs.
Not sure how you arrive at that.
> . On the other hand, looking around in Europe, I don't manage to find a single country where austerity measures appear to have produced anything than deeper recession.
Its kind of like saing look at these sinking ships fixing parts of the ship is really not working for them.
I main sure you can not reduce goverment spending for some amount of time but not forever. Eventually people will not give you more money. Goverment spending is no solution in greece, anybody can see that, even keynsians, the only thing they want is to wait with buged cuts until the economy is stable but that is not always a option.
Greece has particular problems. A culture of pork barrel, corruption, nepotism and tax evasion (not to mention cooking the books) does not make for sustainable governmental spending. But now that they are implementing unprecedented cuts, the country is going down the drain.
Keynesian economics is only partially wrong, the only case where it is always wrong is if the Government always buy productivity less efficiently than the free market. Given the rather poor job that financial institutions have done recently I would think it would be hard to argue that this is always the case; we all know public servants don't get paid the insane wages that bank executives do.
Regardless of whether the source is the government or employers giving money to poor people is a good way to boost productivity because poor people spend money, rich people by comparison don't.
Government buys everything less efficiently than the free market. That's what you can do when individuals aren't held accountable (I'm talking about government employees, not elected officials).
* The US spends roughly double the % of GDP of other nations in Europe with single payer on healthcare and gets similar results. That's twice as expensive for the same result. Their "government spending" is 2x as efficient as the totally private US system.
>The sad truth, to me, is that we are responsible because we make our governments spend too much money.
Our governments do not "spend too much", the main economic problems we have are too much bad debt (leading to zombie banks), an excess of fraud in the financial sector and not enough economic activity as a result, resulting in high unemployment.
A government can never spend too much money (it is created with a few strokes of a computer keyboard). They can only spend beyond the limits of the economy's capacity. Right now almost every western economy is operating way under capacity, which is obvious if you look at almost any metric from inflation to employment to inventory.
The government spending more would actually help, although what we really need is for the banks to start writing off bad debts - which they don't want to do because then they would be insolvent.