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Do we need to take drastic action to save the American banking system?  Or can we just let weak banks “muddle through,” using their operating profits to slowly but steadily improve their solvency over time?  The latter was the Japanese approach, and Matt Yglesias points out today that there are some revisionist arguments going around that, actually, Japan didn’t do all that badly.  So maybe muddling isn’t so bad after all.

Along the same lines, John Hempton once pointed out to me that Thailand followed the same approach after their currency crisis in 1997, and it worked fine.

Then again, Sweden and Norway needed massive intervention to save their banking system in the early 90s.  Muddling wouldn’t have worked for them.

So it all depends.  That’s not a very exciting conclusion, is it?  But that’s life in the world of high finance.  It’s just like Hollywood: nobody knows anything.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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