"As far as Professor Stiglitz is concerned, he made the same criticism of the U.S. bank package, which is now proved to be a tremendous success."
Bailouts are preventing recovery. By this time during the Great Depression of the 1930s the bad debt had been dealt with and was no longer a millstone around the neck of the economy. But other actions or refusal of actions by the Fed and the US Government made things worse. We have learned about not repeating the latter. But the bailouts have prevented any resolution of the bad debt overhang and this is poisoning the economy. Lenihan can speak of the US bailout as having "proved to be a tremendous success" when unemployment is back to 6%, the remaining banks actually are solvent and the GDP/National Debt is back to within 10% of where it was prior to the crisis.
I seriously doubt that he, or most of us, will live so long as to see that in the USA or Ireland unless the course of action of the respective governments is radically changed. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
By this time during the Great Depression of the 1930s the bad debt had been dealt with and was no longer a millstone around the neck of the economy.
To me, the trouble with Stiglitz's arguments, and to a much greater extent the trouble with people like Krugman is that they are starting from a from a more orthodox economic analysis than even Summers. In actuality, the banks do have a gun to the head of the world governments and the difference between banana republics and Ireland or UK and USA in this case is not so great. If you begin from the position that the banks have captured decisive political control over the last 20 years, then the naivete of the idea that "governments" should just put their feet down and let "the market" clean up, becomes more apparent.
Contrary to conventional wisdom, Summers has been articulating a more "radical" critique of the banking system than Krugman, and perhaps than Stiglitz.
Larry Summers has been consistently making a similar claim: he argues that the banking system in the US has averaged a major collapse requiring government bailout every 3 years since the 1970s and that this indicates systemic trouble.
http://agonist.org/sean_paul_kelley/20091016/a_crisis_every_three_years
