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by AnimalMuppet
1862 days ago
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No, I don't think it's much of an open question. We have seen historically what happens in that kind of situation. That didn't happen in 2008. Also in 2008, we had an unprecedented government intervention. Now, you can claim that "this time would have been different", but the burden of proof is on you for that claim. Without that proof, the observations are "it didn't crash when it usually did, and the government intervention is what was different". Not quite proof, but very suggestive. You observe that some countries did not bail out their banks. But which countries? The US and big European banks are systemically important worldwide in a way that the banks of, say, Croatia or Egypt are not. (Not saying those are the countries you have in mind - I don't know which ones you're talking about.) If country X didn't have a real estate boom, and let some banks go under without bailout, it shouldn't have caused much damage. |
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The example is Iceland. It let its banks fail, wrote down nearly 15% of household debt, let its currency collapse, put capital controls in place. Completely opposite of the west did, everything exactly opposite of what global banking cartel insisted on.
Guess what? They recovered way quicker. If you contrast it to another smaller country that was also hit pretty bad, Ireland, who followed the more common bailouts+austerity, Iceland recovered years ahead of Ireland.
Yes, Iceland is a small country. The bank debt however was quite ridiculous: 20x larger than the GDP of the entire country (lol), and threatened failures of European banks, as most borrowers were foreign. The UK and Dutch governments had to compensate their residents. It was an issue systemic enough to create a diplomatic row and even attempts to kick out Iceland out of the free trade block.
There are plenty of historical examples that contradict the "zomg bailout or else the world ends" FUD.
In the Asian Tiger crisis of 1997, economies with capital controls and managed exchanged rates (Singapore, Taiwan, China, Vietnam) fared much better than relatively more open economies that implemented IMF demands(South Korea, Phillipines, Malaysia, Indonesia), despite of the incessant FUD and pressure from the West at the time.
Even in the case of Great Depression in 1930s, a rather mainstream opinion of the monetarist school of thought today is that the intervention by the Fed was either the cause, or made things much worse. No, it's not some fringe crackpot theorists, but an orthodox mainstream opinion. Nearly 100 years later it is not firmly settled still.
Bankers have perverse moral incentives to convince you that handing over your hard earned tax dollars to them is somehow good for you. Of course they'd say that.
Evicted taxpayers' money going to bailout rich fund managers that made bad bets is the hypocrisy of systemic proportions indeed.