Will 700 Billon Dollar help:Data from past Bubble Burst

By | October 5, 2008 4:53 pm

The US$ 700 billion bailout, the US government claims, is essential
to revive the economy. While the long term impact will have to be
seen, the near term impact will be nothing more than a short term
reprieve for the market which would fade away quickly.
The bailout package will put pressure on the Dollar’s exchange rate
and cause inflationary trends in the US economy. A look back at
bailouts elsewhere reveals that such measures haven ít exactly
proved to be the best medicine. In 1980s, the economies of Sweden,
Norway and Finland had expanded drastically due to deregulation
and low interest rates. With the burst of reality and stock market
bubble a high debt burden was becoming difficult to sustain in the
three economies. Measures similar to the Fed’s were taken but
proved unsuccessful.

For example the Swedish government raised a US$14bn
restructuring fund to guarantee bank obligations and created an
organization to buy assets at a discount. Norwegian government
took over the three largest banks while the Finnish government
merged 40 banks into one entity. The moves by the three countries
failed to yield immediate results as consumer spending fell and banks
reduced lending. In fact, Swedish and Finnish economies shrunk
for three consecutive years. The US is facing a once in a century
crisis, which will not vanish overnight.

So situation is still precarious as the extent is still know lets wait and watch

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