And if governments responded to problems at financial institutions in their countries by attempting to protect only domestic investors, the result would be a rapid, and likely very disruptive, unwinding of the international capital flows that run through the global banking system, resulting in greater strains on financial institutions and so on the economy. Re-creating the problems that got us here?
The massive price tag for cleaning up the crisis has demonstrated the value of preventing these imbalances from building up in the first place. The third lesson is that maintaining a low and stable inflation rate is a two-edged sword. Yes, there are the expected benefits in terms of the efficient functioning of the economy and financial markets.