Paul Krugman writes: Justin Fox suggests that we learn from the way Sweden dealt with its financial crisis at the beginning of the 90s. I’m looking into it. What Justin doesn’t mention, however, is that (according to Reinhart and Rogoff [pdf!] ) the resolution of Sweden’s financial crisis imposed a fiscal burden — that is, [...]

With markets now closed for the day, you’d have to say the Fed’s frantic actions of the weekend–engineering the fire sale of Bear Stearns, cutting the discount rate and creating yet another “lending facility”–were successful. Stock markets didn’t collapse (Dow up slightly, S&P 500 and Nasdaq down), and, much more importantly, credit markets didn’t either. [...]

Bear Stearns’s share price went from $145 a year ago to $57 last week to $30 Friday to $3.82 this afternoon. That’s still $1.82 above the $2 a share JP Morgan Chase has offered to buy Bear (hope springs eternal, I guess), but it ain’t much. Now the FT’s Alphaville blog reports that “spurious” rumors [...]

See, I’m not the only one pushing the Swedish solution! From Merrill Lynch North American economist David Rosenberg’s Morning Call Notes today: The Japanese credit crisis is usually cited as the benchmark for what not to do. But few cite Sweden’s crisis as a template on what might actually work. … the Swedish authorities realized [...]