I like and agree with this statement.
I like it even though Iceland’s politicians weren’t necessarily as brave and far-seeing as the statement implies.
Banks were allowed to go hog-wild in the United States and Europe in the years leading up to the 2008 financial crisis, but Iceland’s banks were wild and crazy even by Wall Street and City of London standards. They collected money from depositors all over the world, and lent out money at high interest rates without thinking about the high risk. Investors in the United Kingdom, the Netherlands and other countries bought into this risky behavior without considering that there would be a day of reckoning.
When the crash came, it wouldn’t have been possible for Iceland to bail out its banks even if it had wanted to do so. The banks’ liabilities were equal to eight times Iceland’s GDP (its annual economic output).
Iceland did suffer severely from the recession, and it isn’t out of the woods yet. Individual Icelanders are struggling economically, Iceland has a big trade deficit and the country is going to take another economic hit when the government lifts exchange rate controls on the Icelandic kroner. In the last election, Icelanders voted in the political parties whose policies led to the financial crash, which is hard for me to understand.
Still Iceland’s recent history shows that it is possible to give relief to the honest citizen and prosecute the crooked financier, and still survive to tell the tale.
Click on Wall Street on the Tundra for Michael Lewis’s shrewd and entertaining account of the reasons for Iceland’s financial crash.
Click on Iceland’s Stabilized Economy Is a Surprising Success Story for a report in Forbes.
Click on Iceland’s debt writedowns cleared a path to recovery for an article in the Irish Times comparing Iceland’s policy favorably to Ireland’s rescue of its big banks.
Click on Iceland’s election: voters fear the EU more than a return to the bad old days for a report on how the political parties responsible for Iceland’s financial debacle have been returned to power by the voters.
Click on Peasants for an interesting and highly readable analysis of Iceland’s politics by a native Icelander. Also, this.
Tags: Bank Bailouts, Banks, Banksters, Great Recession, Iceland, Wall Street
Phil Ebersole's Blog 
July 5, 2013 at 5:56 pm |
Of course, it also took a strong, independent government to imprison Iceland’s wealthiest citizens. We do not have such strong leadership in the United States, where bankers can buy off our politicians. Also, it took an Icelandic electorate vastly more intelligent than the crack addicts we elect to understand the situation and attack the problem from the most effective angle.
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