LyrArc Article Gist
How Sweden in 1992 and is Finance Minister Lundgren faced a similar crisis in its banking system after a housing bubble in that country collapsed. At that time the way Sweden approached it set aside 65 billion kronor or $11.7 billion dollars then or $18.3 billion in today's dollars, 4% of its gross domestic product, for rescuing failing banks. The US plan for $700 billion is roughly 5% of gross domestic product. But the way Sweden did it it extracted full price from shareholders and rescue was arrranged only after the Swedish government got a big equity share in the banks that were rescued. Lundgren is concerned that the US plan does not provide for the US government to take big equity stakes in the banks that receive government money. By selling off these shares in better times the government of Sweden has recovered most of the money depending on how its calculated. However the US government has taken big ownership stakes in Fannie, Freddie, and in AIG. And the plan is not yet spelled out. In terms of its size its similar to the Swedish plan an in this sense its similar, a big government effort to take a decisive and complete approach to the problem. In the short run this may create problems for the dollar according to currency experts like John Taylor, but some experts like currency strategist at Deutsche Bank think that in the longer term this rescue plan hel[ps American macroeconomic fundamentals and in doing so will help the dollar. Another factor is the European economy and as Europe also faces some problems of its own, from a housing bubble standpoint Britain, Ireland and Spain fall in the same boat as the Americans, and Germany may also have some bad loan problems of its own, so the macroeconomic fundamentals may weaken in Europe over time and this might also favor the dollar vs the euro in the longer term. ...
How Sweden in 1992 and is Finance Minister Lundgren faced a similar crisis in its banking system after a housing bubble in that country collapsed. At that time the way Sweden approached it set aside 65 billion kronor or $11.7 billion dollars then or $18.3 billion in today's dollars, 4% of its gross domestic product, for rescuing failing banks. The US plan for $700 billion is roughly 5% of gross domestic product. But the way Sweden did it it extracted full price from shareholders and rescue was arrranged only after the Swedish government got a big equity share in the banks that were rescued. Lundgren is concerned that the US plan does not provide for the US government to take big equity stakes in the banks that receive government money. By selling off these shares in better times the government of Sweden has recovered most of the money depending on how its calculated. However the US government has taken big ownership stakes in Fannie, Freddie, and in AIG. And the plan is not yet spelled out. In terms of its size its similar to the Swedish plan an in this sense its similar, a big government effort to take a decisive and complete approach to the problem. In the short run this may create problems for the dollar according to currency experts like John Taylor, but some experts like currency strategist at Deutsche Bank think that in the longer term this rescue plan hel[ps American macroeconomic fundamentals and in doing so will help the dollar. Another factor is the European economy and as Europe also faces some problems of its own, from a housing bubble standpoint Britain, Ireland and Spain fall in the same boat as the Americans, and Germany may also have some bad loan problems of its own, so the macroeconomic fundamentals may weaken in Europe over time and this might also favor the dollar vs the euro in the longer term. ...
