I read this when it first appeared and thought his analysis was an extreme worst-case scenario.
Of course, the reason I bother to keep up with Krugman is that his economic insight is always illuminating, even when I disagree with him. This time he gets extra points for seeing into the future. The date on the column is March 17, 2008.
The U.S. savings and loan crisis of the 1980s ended up costing taxpayers 3.2 percent of G.D.P., the equivalent of $450 billion today. Some estimates put the fiscal cost of Japan’s post-bubble cleanup at more than 20 percent of G.D.P. — the equivalent of $3 trillion for the United States.
As Bear goes, so will go the rest of the financial system. And if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money.
If these numbers shock you, they should. But the big bailout is coming. The only question is how well it will be managed.