GLOBEINVESTOR
http://globeinvestor.com/servlet/story/RTGAM.20081002.wbankslessons02/GIStory/

I found this a useful article. It compares the current meltdown in the US market to an earlier crisis in Scandinavia, the 'Nordic Bubble'. (OK. I know this is comparing apples and oranges but some basic principles apply across the board). In the Scandinavian meltdown, a period of low interest rates and financial deregulation led to easy credit and overvalued real estate prices (sounds familiar?). By its end 10% of loans went bad. The Scandinavian response was very similar to the “bailout” plan, impose stricter controls on the markets, consolidate banks, and buy up the bad debts. The crisis was handled, but here is where it gets really depressing, to quote: “The financial crisis abated, but the economies of Finland and Sweden shrank for three consecutive years, while unemployment soared. The jobless rate in Finland exploded, to 19.9 per cent in early 1994 from 2.1 per cent in 1990, while Sweden's unemployment rate averaged almost 10 per cent in 1997, far from the 1.6 per cent the country boasted in 1990”. The article compared the Nordic response to chemotherapy, whereas the Japanese response to their financial crisis was compared to morphine. Basically, from past form, whichever way the legislators turn things get worse. It may not be a fully soluble problem, the issue then is what is the least damaging strategy.