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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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File URL: http://hdl.handle.net/10.1093/cje/bep036
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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 33 (2009)
Issue (Month): 4 (July)
Pages: 653-663

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Handle: RePEc:oup:cambje:v:33:y:2009:i:4:p:653-663

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Cited by:
  1. Giancarlo Bertocco, 2011. "Finance and risk: does finance create risk?," Economics and Quantitative Methods qf1115, Department of Economics, University of Insubria.
  2. Eduardo Strachman & José Ricardo Fucidji, 2012. "The Current Financial And Economic Crisis: Empirical And Methodological Issues," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 0(1), pages 95-123, June.
  3. 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.
  4. Hein, Eckhard & Truger, Achim, 2010. "Finance-dominated capitalism in crisis – the case for a Global Keynesian New Deal," MPRA Paper 21175, University Library of Munich, Germany.

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