In Sweden. The Swedish economy is "growing rapidly, creating jobs and gaining a competitive edge. The banks are lending, the housing market booming. The budget is balanced." Annual growth in the first quarter was 6.4%.
How did they do it? First of all, they built up a surplus, which we would have had here if we had continued President Clinton's policies. The surplus gave them additional fiscal resources and leverage.
They spent more when times were bad. The Swedish social safety net kept money in the economy. Sweden didn't need a stimulus because the safety net was the stimulus.
They kept interest rates low--near zero, even under zero in some cases. They've recently begun raising interest rates, all the way up to 2%, because the economy has been so robust. They also let their currency fluctuate in value which made some Swedish products more competitive in price.
The government also acted to back up the banking system. The banking system itself had been more conservative in its policies because of Sweden's banking problems in the early 1990's.
...the Swedish banking system seems to have held up okay because the pain of the early 1990s was severe enough as to scar both bank executives and regulators, leaving them with little temptation to go into risky real estate lending in the mid-2000s, even when the rest of the world was doing just that.
Budgetary rules and bank supervision were strengthened, says the Economist. As Cecilia Hermansson, chief economist of Swedbank, put it, "After the crisis in the ’90s, it was clear we needed to be more conservative and careful...burn your tongue once on hot milk and you will start blowing on yogurt.”
We don't have anything to learn from foreigners.
Posted by: Hypatia | July 19, 2011 at 05:31 PM
Which is why you almost never read a positive story about another country in the American press.
Posted by: John Petty | July 21, 2011 at 10:54 AM