John Quiggin says the world financial system is in need of radical restructuring:
In which I disagree with Paul Krugman, by John Quiggin: As James Surowiecki points out here, my views on what’s entailed in bank nationalisation differ significantly from those of Paul Krugman. Krugman, like quite a few other advocates of nationalisation, has in mind models like the Resolution Trust Corporation and the Swedish nationalizations of the 1990s, where the government took insolvent institutions into temporary public ownership, liquidated the bad assets and returned them to the private sector. These solutions worked well because the global financial system as a whole was solvent and liquid, even though some sectors (US S&Ls, Swedish banks) were not.
What’s needed in the present case is not only to fix the problems of individual banks, problems on a much bigger scale than have been seen before..., but to reconstruct a failed global financial system. ... The job is likely to be much slower than the rescues mentioned above, and the institutions that emerge from it will be very different from those that went in.
But, contra Surowiecki this time, this only strengthens the argument for nationalisation. Financial restructuring is going to be a huge challenge, involving both a radical redesign of national regulations and the construction of an almost completely new global financial architecture. ...
 Krugman is well-known for being right when lots of others have been wrong, so take this into account in assessing the arguments.
The ability of countries to work cooperatively to reconstruct the financial system will be a test case for our ability to work together to solve global warming. If we cannot find a way to work together to fix the problems with the global financial system even though there is such a clear need to do so, that will not be a good sign. But perhaps this works the other way too. If we do somehow manage to work together and improve the financial architecture, that could help to set the stage for further cooperative efforts in the future.