Krugman writes: "Three years ago Sweden was widely regarded as a role model in how to deal with a global crisis. The nation’s exports were hit hard by slumping world trade but snapped back; its well-regulated banks rode out the financial storm; its strong social insurance programs supported consumer demand; and unlike much of Europe, it still had its own currency."
Paul Krugman. (photo: NYT)
Sweden Turns Japanese
21 April 14
hree years ago Sweden was widely regarded as a role model in how to deal with a global crisis. The nation’s exports were hit hard by slumping world trade but snapped back; its well-regulated banks rode out the financial storm; its strong social insurance programs supported consumer demand; and unlike much of Europe, it still had its own currency, giving it much-needed flexibility. By mid-2010 output was surging, and unemployment was falling fast. Sweden, declared The Washington Post, was “the rock star of the recovery.”
Then the sadomonetarists moved in.
The story so far: In 2010 Sweden’s economy was doing much better than those of most other advanced countries. But unemployment was still high, and inflation was low. Nonetheless, the Riksbank — Sweden’s equivalent of the Federal Reserve — decided to start raising interest rates.
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