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Do we need to take drastic action to save the American banking system?  Or can we just let weak banks “muddle through,” using their operating profits to slowly but steadily improve their solvency over time?  The latter was the Japanese approach, and Matt Yglesias points out today that there are some revisionist arguments going around that, actually, Japan didn’t do all that badly.  So maybe muddling isn’t so bad after all.

Along the same lines, John Hempton once pointed out to me that Thailand followed the same approach after their currency crisis in 1997, and it worked fine.

Then again, Sweden and Norway needed massive intervention to save their banking system in the early 90s.  Muddling wouldn’t have worked for them.

So it all depends.  That’s not a very exciting conclusion, is it?  But that’s life in the world of high finance.  It’s just like Hollywood: nobody knows anything.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

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