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Then and now, monetary policy could not persuade frightened people to spend and invest.

The second Keynesian lesson was the need for some international structure to balance surplus and deficit nations.

Europe has responded to the crisis with the very British approach of muddling through, but King predicts it won’t work. Creating a true federal union, while an admirable goal, will be the work of a hundred years; the only quick way for countries to adjust is the breakup of the euro zone. King thinks the euro zone must confront the basic choice between accepting a transfer union or changing the membership of the monetary union. “Muddling through” isn’t a serious option.

Carefully taught, the assignments can help make math more concrete. Students don’t just memorize their times tables and addition facts but also understand how arithmetic works and how to apply it to real-life situations. But in practice, most teachers are unprepared and children are baffled, leaving parents furious.

On national tests, nearly two-thirds of fourth graders and eighth graders are not proficient in math. More than half of fourth graders taking the 2013 National Assessment of Educational Progress could not accurately read the temperature on a neatly drawn thermometer.

On the same multiple-choice test, three-quarters of fourth graders could not translate a simple word problem about a girl who sold 15 cups of lemonade on Saturday and twice as many on Sunday into the expression “15 + (2×15).” Even in Massachusetts, one of the country’s highest-performing states, math students are more than two years behind their counterparts in Shanghai.

A 2012 study comparing 16-to-65-year-olds in 20 countries found that Americans rank in the bottom five in numeracy.

One study that examined medical prescriptions gone awry found that 17 percent of errors were caused by math mistakes on the part of doctors or pharmacists.

“I’m just not a math person,” Lampert says her education students would say with an apologetic shrug.

In the 1970s and the 1980s, cognitive scientists studied a population known as the unschooled, people with little or no formal education.

For instance, many of the workers charged with loading quarts and gallons of milk into crates had no more than a sixth-grade education. But they were able to do math, in order to assemble their loads efficiently, that was “equivalent to shifting between different base systems of numbers.”

Studies of children in Brazil, who helped support their families by roaming the streets selling roasted peanuts and coconuts, showed that the children routinely solved complex problems in their heads to calculate a bill or make change.

The cognitive-science research suggested a startling cause of Americans’ innumeracy: school.

Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald’s. The “4” in “¼,” larger than the “3” in “⅓,” led them astray.

In the process, she gave them an opportunity to realize, on their own, why their answers were wrong.

At most education schools, the professors with the research budgets and deanships have little interest in the science of teaching

The answer-getting strategies may serve them well for a class period of practice problems, but after a week, they forget. And students often can’t figure out how to apply the strategy for a particular problem to new problems.

Some of the failure could be explained by active resistance.

A year after he got to Chicago, he went to a one-day conference of teachers and mathematicians and was perplexed by the fact that the gathering occurred only twice a year.

More distressing to Takahashi was that American teachers had almost no opportunities to watch one another teach.

In Japan, teachers had always depended on jugyokenkyu, which translates literally as “lesson study,” a set of practices that Japanese teachers use to hone their craft. A teacher first plans lessons, then teaches in front of an audience of students and other teachers along with at least one university observer. Then the observers talk with the teacher about what has just taken place. Each public lesson poses a hypothesis, a new idea about how to help children learn.

The research showed that Japanese students initiated the method for solving a problem in 40 percent of the lessons; Americans initiated 9 percent of the time.

Finland, meanwhile, made the shift by carving out time for teachers to spend learning. There, as in Japan, teachers teach for 600 or fewer hours each school year, leaving them ample time to prepare, revise and learn. By contrast, American teachers spend nearly 1,100 hours with little feedback.

“Sit on a stone for three years to accomplish anything.”

In one experiment in which more than 200 American teachers took part in lesson study, student achievement rose, as did teachers’ math knowledge — two rare accomplishments.

Examining nearly 3,000 teachers in six school districts, the Bill & Melinda Gates Foundation recently found that nearly two-thirds scored less than “proficient” in the areas of “intellectual challenge” and “classroom discourse.”

Unfortunately, often supervisors in charge of the failing entity in the years of the debt run up were the ones charged with uncovering the problems.

Spain was the leader in the introduction of a dynamic provision – a provisioning tool that forces banks to increase provisions without reference to any specific loan. The intention of this tool was twofold: to mitigate the bad times, and to cool the booms in the good times (Holmstrom and Tirole 1997). Dynamic provisions were endorsed as part of the Basel III standards in December 2010, in part on the strength of Spain’s experience. And indeed the existing evidence (Jiménez et al. 2012) shows that the tool worked as intended, dampening the credit boom and softening somewhat the credit crunch. However, it is clear by now that their level was not nearly enough, as their size – 3% of GDP at their highest point (2004) – was simply not of a magnitude commensurate with the credit losses.

Without the provisions, the reality of the cajas' accounts would have become much faster a concern, and would have imposed itself on the regulator

Had the Banco de España ordered an audit of the system after uncovering numerous irregularities in CCM, it would have not been able to deal with the capital shortfalls uncovered as there was no appropriate resolution regime in Spain at the time

governance played a critical role in the development of the Spanish crisis. In the Spanish case, the supervisor, confronted with powerful and well connected ex-politicians decided to look the other way in the face of obvious building trouble.

More systematic evidence of the role played by these governance issues is provided in a 2009 paper (Cuñat and Garicano 2009b) where we showed that cajas with chief executives who had no previous banking experience (!), no graduate education, and were politically connected did substantially worse in the run up to the crisis (granting more real estate developer loan, up to half of the entire loan book in some instances) and during the crisis (with higher NPLs).

Last year, Brazilian politicians used subsidies and the threat of continued high tariffs on imports to persuade Foxconn — which makes smartphones and computers in Asia for dozens of technology companies — to start producing iPhones, iPads and other devices in a factory north of São Paulo.

“Closing our border is a 20th-century thought, and it will only weaken the economy over the long term,”

These huge recessions do matter. For Latvia, the cumulative loss from 2008 to 2012 adds up to 77 per cent of the country’s pre-crisis annual output. On the same basis, the loss was 44 per cent for Lithuania and 43 per cent for Estonia.

In brief, Latvia, worst-hit of the Baltic countries, suffered one of the biggest depressions in history. It is recovering. But it has not yet fully recovered. Are its policies a model for others? In a word, no.

These states have four huge advantages

First, according to Eurostat, Latvian labour costs per hour, in 2012, were a quarter of those of the eurozone as whole, 30 per cent of those in Spain and half those of Portugal.

Second, these are very small and open economies

Its trade partners hardly notice Latvia’s adjustment. But they would notice a comparably large Italian one.

Third, foreign-owned banks play a central role in these economies. For the eurozone, this is the alternative to a banking union: let banks with fiscally strong host governments take over the weaker financial systems.

inally, the Baltic states have embraced their European destiny as an alternative to falling back into Russia’s orbit.

“The pressure put on the Japanese was absolutely critical for them to agree to export restraints,”

But no place has benefited to the extent of Tennessee, which counts more than 60,000 jobs related to automobile and parts production.

We have long known that portfolio and short-term inflows fuel consumption booms and real-estate bubbles, with disastrous consequences when market sentiment inevitably sours and finance dries up. Governments that enjoyed the rollercoaster ride on the way up should not have been surprised by the plunge that inevitably follows.

They must resist the temptation to binge on foreign finance when it is cheap and plentiful.

It is true, but unhelpful, to say that governments have only themselves to blame for having recklessly rushed into this wild ride. It is now time to think about how the world can create a saner balance between finance and the real economy.

Death by Finance

Unlike most other Spanish industries, car manufacturing has no sectorwide collective bargaining agreement with unions. As a result, each carmaker has been able to adjust working hours with its own employees, in response to changing demand.

In return, the companies have promised workers that they will not be subjected to the huge layoffs made in other parts of the economy,

I don’t want to give lessons to anybody. But at such a delicate moment for Spain, showing that we believe in flexibility and consensus has certainly been highly valued by the carmakers.”

While German interest rates remained little changed, rates in Greece, Spain, Portugal, Ireland and Italy tumbled, fueling consumption and swelling their imports of German cars and other products.

Now, budget stringency is being accompanied by labor-market reforms across Southern Europe.

At best, these adjustments yield benefits only after several years,

"The ECB was created with the mission to avoid the inflation of the 1970s and 1980s, when there was global inflation. Now we have global deflationary pressure, we need a different point of view," he says.

They say it's arithmetically impossible for every economy in the world to build growth on the German model of export success; and if every country in the euro zone is to do it, they need to find others willing to run big deficits in the rest of the world.

So the private sector as a whole is bent on reducing debt.

Businesses will use depreciation charges and sell off inventories to do so. Households are trying once more to save. Less investment and more saving spell declining incomes.

now that they know how dangerous their leverage of yesteryear was.