Did the Financial Crisis Matter?
By Arnold Kling
Dean Baker says no.
Spain is noteworthy because it now has an unemployment rate of more than 19%, the highest rate in any of the wealthy countries. Spain did not have a financial crisis. In fact, its well-regulated financial system is often held up as model for the United States.
Spain did have a horrific housing bubble. As a result, the share of construction in the economy rose from less than 8% of GDP at the end of the 90s to 12.3% in 2007
If Baker is correct, then the financial crisis was not the real problem. Which means that TARP, the bailouts, and turning the Fed into a piggy bank were not the solution.
Thanks to Mark Thoma for the pointer.