The writer is chair of Rockefeller InternationalAs bank runs spread, it has become clear that anyone who questions a government rescue for those caught underfoot will be tarred as a latter-day liquidationist, like those who advised Herbert Hoover to let businesses fail after the crash of 1929.
Liquidationist is now challenging fascist as the most inaccurately thrown insult in politics. True, it’s no longer politically possible for governments not to stage rescues, but this is a snowballing problem of their own making. The past few decades of easy money created markets so large — nearing five times larger than the world economy — and so intertwined, that the failure of even a midsize bank risks global contagion.
More than low interest rates, the easy money era was shaped by an increasingly automatic state reflex to rescue — to rescue the economy from disappointing growth even during recoveries, to rescue not only banks and other companies but also households, industries, financial markets and foreign governments in times of crisis.