Leif Pagrotsky on the Swedish Banking Crisis

Question: What provoked the banking crisis of 1992?

Pagrotsky: It had very, very little to do with the construction of the welfare state economic model. That was one element of the economic model that was fundamentally flawed. We had to fix the exchange rate policy, and that was [unattainable]. We tried to defend the existing exchange rate with interest rates up to 500%. That was ridiculous. It was a failure, but we were so indoctrinated, we have lived with a fixed exchange rate regime all our lives, since the early ‘30s, and we could not imagine that there’s something wrong with a fundamental element of our economic policy. When that was abolished, the economy took off and we have had much more flexible situations since then. And today it is one of the fundamental assets of our economy, that we are flexible enough to set interest rates according to our own needs, high interest rates if we have [overheating] and inflation and we can stimulate by low interest rates when a recession is threatening, and I think that was one of the main elements of the shocks that we experienced in the late ‘80s. We had a shock from the financial market, and, as you know, financial markets destabilize. They don’t stabilize. They destabilize economies. They destabilized our economy. We could not do anything about it because we did not have in our possession the interest rate weapon because we had a fixed exchange rate regime, and I think that was a much more important explanation.

Leif Pagrotsky on the Swedish banking crisis of the early 1990s.

​There are two kinds of failure – but only one is honorable

Malcolm Gladwell teaches "Get over yourself and get to work" for Big Think Edge.

Big Think Edge
  • Learn to recognize failure and know the big difference between panicking and choking.
  • At Big Think Edge, Malcolm Gladwell teaches how to check your inner critic and get clear on what failure is.
  • Subscribe to Big Think Edge before we launch on March 30 to get 20% off monthly and annual memberships.
Keep reading Show less

Apparently even NASA is wrong about which planet is closest to Earth

Three scientists publish a paper proving that Mercury, not Venus, is the closest planet to Earth.

Strange Maps
  • Earth is the third planet from the Sun, so our closest neighbor must be planet two or four, right?
  • Wrong! Neither Venus nor Mars is the right answer.
  • Three scientists ran the numbers. In this YouTube video, one of them explains why our nearest neighbor is... Mercury!
Keep reading Show less

Why is 18 the age of adulthood if the brain can take 30 years to mature?

Neuroscience research suggests it might be time to rethink our ideas about when exactly a child becomes an adult.

Mind & Brain
  • Research suggests that most human brains take about 25 years to develop, though these rates can vary among men and women, and among individuals.
  • Although the human brain matures in size during adolescence, important developments within the prefrontal cortex and other regions still take pace well into one's 20s.
  • The findings raise complex ethical questions about the way our criminal justice systems punishes criminals in their late teens and early 20s.
Keep reading Show less