Monday 18 January 2010

Ominous lessons of the 1930s for Europe

FT
"The Great Depression taught us several lessons. The first one is that central banks must be ready to provide ample liquidity to save the banking system. Present-day central banks did exactly that. They did not repeat the mistakes of the 1930s when their predecessors tightened money in the face of a banking crisis. The second lesson is that governments should not try to balance the budget when economic activity collapses. Governments today did not repeat the mistakes made by many governments in the 1930s that desperately tried to balance their books when the economy crashed. .....it is remarkable to see that the same mistakes are being repeated today involving some of the same countries as during the 1930s. ....."

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