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Tuesday, December 17, 2013
Krugman's Economic Painkillers worked for a while in the case of Mexico, but they created a huge problem for Asia in 1997
As an aside, the US enjoys a huge advantage by having the ability to borrow in US dollars against US dollar assets, which doesn't lead to a mismatch of assets and liabilities.
So, maybe Krugman's economic painkillers, which provided only temporary relief of the symptoms of economic illness, worked for a while in the case of Mexico, but they created a huge problem for Asia in 1997.
Similarly, the housing bubble that Krugman advocated in 2001 relieved temporarily some of the symptoms of the economic malaise but then led to the vicious 2008 crisis. Therefore, it would appear that, more often than not, bailouts create larger problems down the road, and that the authorities should use them only very rarely and with great caution.- in dailyreckoning
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.