Since this whole bailout thing started, I've been wondering how I should address our congress and President, along with the two candidates, and start a campaign to make some sense out of what we are about to embark on... In 1992, Sweden was in the midst of what looks a lot like what we are going through right now in the US. Their financial systems were in complete collapse, banks falling apart, property values in the toilet... sound familiar!? Thie way they approached it was risky, but in the end they were able to bolster their lagging economy and now they are doing quite well. Here's the gist of it...
Of the 70 billion crowns ($10.7 billion) the government pumped into the banking system, it recovered about half from asset sales. The state still holds a $7 billion stake in Nordea , the Nordic region's biggest bank.
The economy rebounded relatively quickly and entered the current downturn in better shape than many European peers.
In a move similar to that taken in Sweden, U.S. authorities have put forward legislation that would authorise the Treasury to buy as much as $700 billion in bad assets to be sold later.
This comes on top of a rescue of American International Group and the takeover of housing finance firms Fannie Mae and Freddie Mac.
But a bailout may not be enough.
U.S. policy makers might also have to pay more attention in future to the country's fiscal and monetary framework. Sweden's focus there was seen as a vital part of its success story.
Spurred by the crisis and rising debts, the Swedish government embarked on a policy of fiscal stringency, with the goal of a budget surplus over the business cycle. The central bank was given more independence and set a specific inflation target.
"It was quite important to create this kind of economic policy framework to regain credibility for fiscal and monetary policy and I think that is quite important for the United States," said Robert Bergqvist, chief economist at Swedish banking group SEB.
Sweden's government now runs a healthy surplus and has the ammunition for pump-priming to counter the effects of the global downturn. Inflation, in double digits through much of the 1980s, has been kept under tight control.
The banks also appear to have taken the lessons of the early 1990s to heart and emerged relatively unscathed from the subprime crisis and the following credit crunch.
NO MIRACLE
While Sweden can provide a roadmap, the scale and complexity of the problems faced across the Atlantic complicate the U.S. rescue plan.
Sweden has a long tradition of central control, while U.S. politicians are likely to find agreement more difficult.
Assets taken over by Swedish government were relatively easy to administer and sell, while a devaluation and a recovery in the global economy helped the country return to growth.
The financial instruments at the heart of the U.S. problems are far more complex and the consequences of authorities' actions likely to shape the global economy.
One lesson the Nordic banking crisis can impart is that rapid, comprehensive and prudent action can mitigate the effects of a crisis in the longer term. But it has a more gloomy point to make about short-term developments.
"The other striking lesson is that despite extensive policy support, all three (Nordic) economies experienced deep recessions," JP Morgan added.
The economy rebounded relatively quickly and entered the current downturn in better shape than many European peers.
In a move similar to that taken in Sweden, U.S. authorities have put forward legislation that would authorise the Treasury to buy as much as $700 billion in bad assets to be sold later.
This comes on top of a rescue of American International Group and the takeover of housing finance firms Fannie Mae and Freddie Mac.
But a bailout may not be enough.
U.S. policy makers might also have to pay more attention in future to the country's fiscal and monetary framework. Sweden's focus there was seen as a vital part of its success story.
Spurred by the crisis and rising debts, the Swedish government embarked on a policy of fiscal stringency, with the goal of a budget surplus over the business cycle. The central bank was given more independence and set a specific inflation target.
"It was quite important to create this kind of economic policy framework to regain credibility for fiscal and monetary policy and I think that is quite important for the United States," said Robert Bergqvist, chief economist at Swedish banking group SEB.
Sweden's government now runs a healthy surplus and has the ammunition for pump-priming to counter the effects of the global downturn. Inflation, in double digits through much of the 1980s, has been kept under tight control.
The banks also appear to have taken the lessons of the early 1990s to heart and emerged relatively unscathed from the subprime crisis and the following credit crunch.
NO MIRACLE
While Sweden can provide a roadmap, the scale and complexity of the problems faced across the Atlantic complicate the U.S. rescue plan.
Sweden has a long tradition of central control, while U.S. politicians are likely to find agreement more difficult.
Assets taken over by Swedish government were relatively easy to administer and sell, while a devaluation and a recovery in the global economy helped the country return to growth.
The financial instruments at the heart of the U.S. problems are far more complex and the consequences of authorities' actions likely to shape the global economy.
One lesson the Nordic banking crisis can impart is that rapid, comprehensive and prudent action can mitigate the effects of a crisis in the longer term. But it has a more gloomy point to make about short-term developments.
"The other striking lesson is that despite extensive policy support, all three (Nordic) economies experienced deep recessions," JP Morgan added.
(some of the information in this post culled from http://www.guardian.co.uk/business/feedarticle/7820460)
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