Bailouts

Clusterstock this morning has a great summary of a Minneapolis Fed paper, The Current Financial Crisis: What Should We Learn From the Great Depressions of the Twentieth Century.  Clusterstock simply titles their post, How To Cause Great Depressions.  The two salient points:

1. Seizing and breaking up insolvent banks while reprivatizing strong ones is expensive, but it works.  See Chile and Finland.
2. Nursing insolvent banks and unproductive firms along leads to a Great Depression.  See Mexico and Japan.

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