| Adam Lerrick | ||||||
You are the finance minister of a major industrial power. Faraway Xanadu is threatened with default. Financial contagion will spread around the globe. The dragons are waiting to devour the spoils. What do you want to do? You launch the thermo-nuclear bail-out package.
Congratulations! You survive, Mr Minister...but your taxpayers are dead.
If crises were a non-repeat game in the global gambling halls, then an expedient donation to prevent major defaults would not only be the wisest but the lowest-cost solution.
Concessions made and intelligence gained could not influence future bouts.
But if rescue missions encourage governments to become profligate, domestic entrepreneurs to overextend, foreign investment to be ill-considered, and speculation to be excessive, all with the expectation that errors will be erased by a G7 guarantee, there is a massive cost down the road.