What (was) the matter with Sweden | Free exchange | Economist.com
If you read this account of the Scandinavian crisis it reads like the mini-version of what is currently happening in the US and the rest of the world. It is important that everyone understand that this is not a case of "no one could have predicted that...". There are people who warned about the crisis (the most visible one was Noriel Roubini), there are emails from Wall Street firms mentioning the incredible risk to the entire system ever two years ago, and there is the Scandinavian crisis that came on the heels of a boom-bust cycle in the housing market.
It is also interesting that under Gordon Brown's plan, the implementation in the UK involved the resignation of the heads of many institutions. Nothing like this is happening in the US. The heads of these institutions are being given ample protection (don't be fooled by "limits on compensation", they are nil) and are being given taxpayer money.
Want to know the end game? The US will come out of this crisis licking its wounds, but it will emerge. The taxpayer will foot the enormous bill, and the financial companies will profit immensely through fire-sale mergers and acquisitions as well as off-loading their losses to the taxpayer while pocketing all of the gains from the last few years.
Rinse and repeat...
The banks got into trouble in all-too-familiar ways. Financial deregulation gave them greater freedom to lend, which they exploited unwisely. Scandinavian property went through a nasty boom-and-bust cycle. And recession (especially severe in Finland when trade with the former Soviet Union collapsed) led to mountains of bad debts.
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