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Revisiting the Great Depression

The Economist has a really nice piece this week on the Great Depression. Why did it happen? What can we learn from it for the current crisis? Have the lessons from the Great Depression been abused by contemporary policy-makers and central bankers? 

We face two dangers when looking at the past to obtain lessons for today. First, the situation and institutions today may be totally different from the past, and thus applying lessons from the past is anachronistic at best. Second, we may have a totally wrong-headed understanding of what happened in the past.

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Bank Runs in Greece

Deposit withdrawals in Greece have been substantial over the past two years.  However, the failure of Greece's politicians to form a coalition government has resulted in deposit withdrawals accelerating - click here and here for more on this.  Depositors are rightly concerned about the exit of Greece from the euro and the subsequent devaluation of their deposits.  The puzzle for me and many others is why are there so many deposits still remaining in the Greek banking system.  One reason is that the Greek banking system is being kept alive by massive injections of money from the ECB.  Will the ECB continue to support the Greek banking system in the face of a mass withdrawal of deposits?  I doubt that there is the political will in Germany for this as the Bundesbank already has a huge exposure to Greece (as well as Spain and Italy) through the ECB's internal Target 2 system.