The Current US Banking Crisis, What Sweden Can Teach the US, and Why It Makes Sense to Listen to Bernanke


global_financial_crisis.jpgBo Lundgren, ex Swedish Finance Minister, knows how to fix economic problems.   And now he’s teaching the US government how to fix its current crisis.  Lundgren was Finance Minister during the Swedish banking crisis of the early 1990’s and the solution, at the time, was easy: big government intervention in the form of cash and (part) government ownership of ailing banks.  Call it fiscal socialism or whatever you’d like, but the policy worked and the same sort of intervention is needed in the US.  

So if government intervention is a strong given in the current US environment (as Fed Reserve Chairman Ben Bernanke stated), then the real question on the table is the level of help or involvement.  Here’s what Sweden did during their crisis:

Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. That is slightly less, proportionate to the national economy, than the $700 billion, or roughly 5 percent of gross domestic product, that the Bush administration estimates its own move will cost in the United States.

US Senators, from both parties however, are hesitant to give Bush’s administration the $700 billion needed to rescue the banking sector – reasoning more along political lines then economic lines (that’s a problem).  Stay tuned to see how the bailout unfolds…

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