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Why don't the bailouts work? Design of a new financial system versus a return to normalcy

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  • Jan Kregel

Abstract

The innovative support measures introduced by the US Central Bank and Treasury in response to the current crisis to bolster bank balance sheets have had little success in restoring liquidity to financial markets. These policies mirror similar policies employed in the 1930s in the USA and the 1990s in Japan, in both cases with little impact. This paper identifies three policies impacting incomes rather than prices, the assessment of system failure, and proposals for system design that were employed in dealing with prior financial crises. That they have not been introduced in response to the present crisis may explain why current measures have not yet had their intended impact of restoring bank lending to the productive economy. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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  • Jan Kregel, 2009. "Why don't the bailouts work? Design of a new financial system versus a return to normalcy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 653-663, July.
    • Handle: RePEc:oup:cambje:v:33:y:2009:i:4:p:653-663
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    File URL: http://hdl.handle.net/10.1093/cje/bep036
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    Cited by:

    1. Giancarlo Bertocco, 2011. "Housing bubble and economic theory: is mainstream theory able to explain the crisis?," Economics and Quantitative Methods qf1116, Department of Economics, University of Insubria.
    2. Geoffrey M. Hodgson, 2019. "The great crash of 2008 and the reform of economics," Chapters, in: Jonathan Michie (ed.), The Handbook of Globalisation, Third Edition, chapter 28, pages 439-456, Edward Elgar Publishing.
    3. Tuna Baskoy, 2011. "Business Competition and the 2007–08 Financial Crisis: A Post Keynesian Approach," Chapters, in: Joëlle Leclaire & Tae-Hee Jo & Jane Knodell (ed.), Heterodox Analysis of Financial Crisis and Reform, chapter 10, Edward Elgar Publishing.
    4. Eckhard Hein & Achim Truger, 2012. "Finance-dominated capitalism in crisis—the case for a global Keynesian New Deal," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(2), pages 187-213.
    5. Giancarlo Bertocco, 2011. "Finance and risk: does finance create risk?," Economics and Quantitative Methods qf1115, Department of Economics, University of Insubria.
    6. Eduardo Strachman & Jos Ricardo Fucidji, 2012. "The Current Financial And Economic Crisis Empirical And Methodological Issues," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 3(1), pages 95-109.
    7. Alexander Lubis & Constantinos Alexiou & Joseph G. Nellis, 2019. "Gauging the Impact of Payment System Innovations on Financial Intermediation: Novel Empirical Evidence from Indonesia," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(3), pages 290-338, December.
    8. Paolo Ramazzotti, 2013. "Shared economic thought and the neglect of social costs. Why progressive economists often stick to conventional wisdom," Working Papers 71-2013, Macerata University, Department of Finance and Economic Sciences, revised Dec 2015.

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