Monday, December 1, 2008

Switzerland Feels Iceland's Pain With Banks Teetering

From a Bloomberg article.

"An isolated European country with an economy geared toward finance and winter sports is no longer a monetary bastion as credit evaporates around the globe. Banks teeter, the once-impregnable currency depreciates and a proudly independent people question whether a centuries-old go-it-alone strategy can survive.

Even Switzerland is wondering if it's immune to the forces ravaging Iceland."

Of course it can go it alone, with the right policies. Switzerland's deficit is a paltry, 1.5% of GDP. This is far to small to stabilize the economy.

What Switzerland needs is a good, old-fashioned, dose of deficit spending, however, the notoriously "hard money" nation will be loathe to do that. That's why the dowturn and the pain will last long.

In addition, false ideas, like this guy saying, "Switzerland can't go it alone," will cause policymakers to believe that they don't have control over their own destiny. That, somehow, it's in the hands of others.

In the U.S. this kind of thinking is pervasive as well and will constrain our ability to help ourselves.

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