The counter example is Iceland who told the banks to get lost and is the only European country who's economy is now ahead of where it was in 2008.

http://www.independent.co.uk/news/business/news/three-charts...

Not the only one -- Poland didn't even have a red year. It exhibited GDP growth throughout the crisis.

Ireland, the example shunned by krugmanites, has followed the IMF/ECB advice and is in better position than it was in 2008.

I see some mixed data on Ireland.

A quick search shows an unemployment rate that just crossed below 10% in April. From 2000-2008, the unemployment rate ranged 4-5% (with very high unemployment in the 80s and 90s). http://www.tradingeconomics.com/embed/?s=ieuert&v=2015080617...

Also, government debt to GDP rose steadily and is near historic highs, although has recently begun to fall: http://www.tradingeconomics.com/embed/?s=irldebt2gdp&v=20150...

By which measure is Ireland in a better position than 2008?

The only reason Ireland's unemployment fell is because of emigration.

The economy is a disaster, especially for young people, home repossessions are just getting started by the banks (who were the actual ones bailed out, wrecking the economy by driving government debt through the roof.) The actual situation on the ground is grim, despite what the official figures might tell you.

Source: Irish person who emigrated.

Iceland is orders of magnitude smaller than the US, and is generally not regarded as a large financial center.

> If we allowed a large automaker to go bankrupt

The 2009 "bailouts" of GM and Chrysler involved each company entering bankruptcy, and having the desirable assets of those firms purchased in bankruptcy by new entities in which the US and Canadian governments were (together) major (in GM's case) or minor (in Chrysler's case) investors. So, any sentence that starts with "if we allowed a large automaker to go bankrupt..." that concludes with describing a result that didn't actually occur is demonstrably incorrect.

In my previous comment, I was referring to liquidation. This would have happened without government intervention, because it takes money to keep a company operating under bankruptcy restructuring. The money required for this was not forthcoming from the private market, which was paralyzed with fear. Counter-party risk alone was a huge concern.

> If we allowed a large automaker to go bankrupt, we probably would have lost the supply chain and many supporting industries which would be gone (from the US) forever.

That's what people thought about textiles and apparel. Neither turned out to be true. Textile mills are coming back to the East Coast (http://www.nytimes.com/2015/08/03/business/chinese-textile-m...) and the number of apparel manufacturing jobs in the Los Angeles County has stabilized in the past several years.

> If we allowed a large automaker to go bankrupt, we probably would have lost the supply chain and many supporting industries

And you'd free a loot of resources (people, money, etc) to create something that people really want, instead of forcing them to work on stuff the government has to pay people to buy.

Anyway, what is sending companies out of the US is your government fiscal policies. Start paying the stuff you take from there (instead of buying on loans), and those companies will be back.

Creating too bigger to fail out of already too big to fail industries does nothing except throw good money after bad, and increase systemic risk for an even worse repetition of a failure.

Not to mention the fact that continuously proceeding with such bailouts is simply unsustainable. The problem lies in our modern inability to stomach losses and handle austerity. It's something no one rightfully wants, but when market failures or financial crises occur, it's for a reason. You're witnessing a natural repricing mechanism at work and no one is disagreeing a lot of destruction can be a by product. But I don't buy your narrative that unless we saved those industries in the US they would have permanently moved elsewhere.

The economy is like an organism, not a washing-machine. The most optimal repairing mechanism is itself.

>The economy is like an organism, not a washing-machine. The most optimal repairing mechanism is itself.

organism have finite life, they die. Washing machine can be maintained/repaired indefinitely. Of course cyborg is the best way.

Individual organisms die. Short of existential events, ecosystems last.

Morality aside, the US government acted in its own self-interest by protecting industries within its borders. It is likely had any major US automakers been liquidated, more wealth would have been destroyed than created.

Extending the organism metaphor, forest fires can be a naturally occurring healthy event that promotes renewal. Sometimes, a fire will burn with enough intensity that the forest itself is destroyed. Should we try to prevent all forest fires, the most destructive fires, or let nature take its course?

The analogy only stretches so far but I think letting nature take it's course isn't as dangerous you think.

Politics also needs consideration. If other countries protect their industries and US does not what will happen?

Then they'll be exposed to systemic risk and we won't.