We are all Keynesians now

Doug Henwood dhenwood at panix.com
Mon Jun 8 08:36:40 PDT 1998

Enrique Diaz-Alvarez wrote:

>I don't think this is a fair comparison. 200 billion is less than 3% of
>US GDP. The Japanese bail out would require on the order of $600
>billion, which is more than 25% of Japan's GDP. I don't know if the US
>ruling class would have been able to come up with $2-3 trillion at the
>drop of hat.

$600 billion is more like 11% of Japan's GDP, but with all those zeros, who's counting?

According to a Bank for International Settlements economic paper (No. 46, October 1996) by Morris Goldstein and Philip Turner, losses and/or resolution costs for banking crises over the last 20 years were, in descending order

Spain, 1977-85 17% of GDP Finland, 1991-93 8 Sweden, 1991 6 Norway, 1987-9 4 U.S, 1984-91 3

And that's just the "industrial" countries. In "developing" countries, Goldstein & Turner cite estimates of more than a dozen episodes in which losses and/or resolution costs exceeded 10% of GDP, including:

Argentina..........\ Chile..............| >25% of GDP Cote d'Ivoire....../ Venezuela 18 Bulgaria 14 Mexico 12-15 Hungary 10

And the longer the Japanese wait, the worse it gets, as anyone who studied the U.S. experience with "forbearance" knows.


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