Emotionally, I love Iceland’s financial policies since the crash of 2008:
Iceland went after the people who caused the crisis — the bankers who created and sold the junk products — and tried to shield the general population.
But what Iceland did is not just emotionally satisfying. Iceland is recovering, while the rest of the Western world — which bailed out the bankers and left the general population to pay for the bankers’ excess — is not.
Few countries blew up more spectacularly than Iceland in the 2008 financial crisis. The local stock market plunged 90 percent; unemployment rose ninefold; inflation shot to more than 18 percent; the country’s biggest banks all failed.
This was no post-Lehman Brothers recession: It was a depression.
Since then, Iceland has turned in a pretty impressive performance. It has repaid International Monetary Fund rescue loans ahead of schedule. Growth this year will be about 2.5 percent, better than most developed economies. Unemployment has fallen by half. In February, Fitch Ratings restored the country’s investment-grade status, approvingly citing its “unorthodox crisis policy response.”
So what exactly did Iceland do?
First, they create an aid package for homeowners:
To homeowners with negative equity, the country offered write-offs that would wipe out debt above 110 percent of the property value. The government also provided means-tested subsidies to reduce mortgage-interest expenses: Those with lower earnings, less home equity and children were granted the most generous support.
Then, they redenominated foreign currency debt into devalued krone, effectively giving creditors a big haircut:
In June 2010, the nation’s Supreme Court gave debtors another break: Bank loans that were indexed to foreign currencies were declared illegal. Because the Icelandic krona plunged 80 percent during the crisis, the cost of repaying foreign debt more than doubled. The ruling let consumers repay the banks as if the loans were in krona.
These policies helped consumers erase debt equal to 13 percent of Iceland’s $14 billion economy. Now, consumers have money to spend on other things. It is no accident that the IMF, which granted Iceland loans without imposing its usual austerity strictures, says the recovery is driven by domestic demand.
What this meant is that unsustainable junk was liquidated. While I am no fan of nationalised banks and believe that eventually they should be sold off, there were no quick and easy bailouts that allowed the financial sector to continue with the same unsustainable bubble-based folly they practiced before the crisis (as has happened throughout the rest of the Western world).
And best of all, Iceland prosecuted the people who caused the crisis, providing a real disincentive (as opposed to more bailouts and bonuses):
Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.
Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.
That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.
Iceland’s approach is very much akin to what I have been advocating — write down the unsustainable debt, liquidate the junk corporations and banks that failed, disincentivise the behaviour that caused the crisis, and provide help to the ordinary individuals in the real economy (as opposed to phoney “stimulus” cash to campaign donors and big finance).
And Iceland has snapped out of its depression. The rest of the West, where banks continue to behave exactly as they did prior to the crisis, not so much.
I think NATO needs to depose the leaders of Iceland. They are persecuting the Bankers.
Populist democracy is like a rabid dog.
The IMF needs to go in and appoint a Technocrat to manage the repayment of interest and capital given to Icelanders, who freely contracted with the Banks.
If they don’t, no money for Icelanders. People should pay their debts.
OK I am being sarcastic, but seriously, is their a risk premium for Icelanders? Will this extra cost harm them long term?
Defying the whims of “modern finance” is always dangerous.
I agree. That is why they capitulated. read this frank assessment of the Icelandic story.
If you don’t care about wealth or debt, it does not matter.
Well that’s interesting, I tried watching “Ancient Code” and got the message “CONTENT UNAVAILABLE – The video is not authorized for your location (US)”. Glad no one is trying to keep people in the dark.
John this article
is pivotal to a world wide movement to prevent the bailing out/transfer of taxpayer wealth. From my experience, the shit that was covered up to keep the ball rolling must be investigated. A lot of approval is not on email, but may have been signed off, if the company had appropriate forms of approval (Which I doubt). So many deals had the Manager give approval which may have circumvented company controls. Very hard to prosecute. Only idiots would have wrote emails implicating.
That is why I gave up on Audit as I felt the Auditors were not tough enough, and many Managers preferred cursory reporting to keep the client happy. Getting next years Audit was the name of the game. I learnt early on that old boys networks, nods and informal understandings is what drives business. Statutory accounts. Earnings per share. Waste of time. Buy sell shares based on momentum, technical analysis. Blue Chip public darlings.
The regulatory capture and the bamboozling of politicians to bail out the big banks was the greatest fraud in history.
Iceland is a great example of how smaller is MUCH better. The only thing more dys-functional than a group is a larger one.
The deal is that everybody knows what’s going on. People fiend ignorance as simply another way to get something for nothing…and it generally works like a charm.
Are you an EF Schumacher fan by any chance?
I am a fan of anybody who understand what’s going on.
Absolute simplicity IS absolute Truth. The larger the group, the higher the level of complexity, the further you move from from the Truth.
It’s that simple.
Something that is ignored in the rush to damn Socialism is that the most prosperous countries in the world are largely socialist. But there’s an equally important point: they are small in population. Overall virtually all of the most prosperous countries on the planet share the characteristic of small size. It may be that it is that characteristic, not the specific economic system that really the deciding factor.
Small is beautiful.
Well.. Maybe .. Somalia is a small country too .. Sweden, Finland, Switzerland, Iceland are all small and sometimes very cold countries and always seem to be used as examples of sucessful places for various reasons .. How come ?
I would love it if you would share this information with the U.S. President Barack Obama.
Lol, you don’t think Obama is aware?
Obama must love his bankers – if he didn’t would they have gotten away virtually scott free with so much?
Pingback: How Iceland healed their economy | Durable Faith
Pingback: The Icelandic Success Story « Beaver County Blue
Perhaps that is why you need more women in power/government.
That’s right, I forgot, women aren’t selfish, self-centered or greedy.
That’s why I am keeping my GF!
Let’s see, in the USA there have been 3 major central-bank/fractional-reserve financial schemes, over the last 250 years. (bank of the united states; second bank of the united states; federal reserve bank)
The first two scams lasted much less than one human lifetime, and were destroyed by the people/voters who realized they were being “had”, after just a little experience with this monster.
Then, women got the vote, and got into government power positions. The most recent emergence of the bankster fraud has persisted for 100 years, and is only getting worse, and is destroying that country.
Yes, great argument for getting more women into political power. We all know they never use the violent power of the state wrongly, on the small scale (“domestic violence” claims, “spousal rape”, “date rape”, “celebrity/athlete rape” claims. How wonderful it will be when those same women have the reigns of violent power on the large scale.
The only problem is that the debt forgiveness/liquidation did not go far enough, especially in terms of household debt, which is still unsustainably high! Need a round two – what about Steve Keen’s QE for the people? Small grants for individuals which must be used to pay off debts if the individual is in debt (but every single resident gets the same grant).
Iceland is a very open minded country, maybe they will listen to Professor Keen.
That would be very interesting. Check this out, they’re looking at the costs and benefits of fractional reserve banking in Iceland rights now:
One problem with mandating full-reserve banking is that it drives fractional reserve banking underground where it will be even riskier and messier.
Pingback: The Icelandic Success Story | My Blog
Individual persons can not be held responsible for the debts they did not contract and that includes government debt. Banks and governments must pay the price of their own foolishness and criminal behavior and not burden those who have not been party to the contract .
Steven: Except that I would use the word “should” (to differentiate “right” from the “might” of governments and banks), I applaud your comments! You illustrate beautifully the deadly danger of government with its cronies: FORCE. As Obama’s most influential mentor, US Communist Saul Alinski, put it, “Everything we do, we do for POWER”.
Pingback: The Icelandic Success Story
Banking is theft.
There’s the legal variety and the illegal variety, but it’s theft, just the same.
Pingback: Iceland Jailed the Bankers - Recovery is Happening
Here in the UK we you have fat cats running a country that use every fiddle to fleece the public of more money, i positive they must learn this when there at public school, on how to shaft every hardworking member of the public on a daily basis, we all know us the public haven`t got a chance and now with the new the west cost mainline tender fiasco, if some one me this could happen, i would not believe them???. Millions of pounds of taxpayers money waisted again i sure you see the pattern, its just another way to waste more money on highly paid public school consultants who are associated to politicians, and so the cycle goes on and its the tax payer who foots the bill again and again. What options do we have all the parties are only interested in there own well being and think of the members of the public as only extra sources of income. Sad but true
I watched the movie about Margaret Thatcher, played by Merryl Streep. MT had principles and although the medicine was harsh, the patient was sick.
Speaking of people being shafted. I saw on our Main Stream Media morning show, that the Money section was promoting Gold as an investment. This is a top for Gold. someone high up is pushing this on the public to buy Gold.
I am selling Gold.
MT and RR ushered in the era of mass financialisation of the Western economies beginning ~1980. Although they did ring-out the high inflation of the seventies [actually Paul Volcker did by raising FF interest rate >2000bps], they also did a great deal to enrich the wealthy at the expense of the middle classes [through target inflation, off-shoring of jobs, further shifting the tax burden from property to labor, doctrine of constant war, de-democratization of the political process, so on and so forth].
Unions F*&$%D Britain.
Pingback: Want Growth? Jail Bankers as Iceland Did | FrenchNewsOnline
Pingback: The Icelandic Success Story
Pingback: SilberNews – 10.12.12 – 1,5% Wochenverlust | DER KLARE BLICK
One can learn a lot about various fads and fantasies from these blogs! RR & MT “won” the cold war (not to overlook the heroic USSR and captive nation dissidents), but it was ignored in the movie because of Hollywood’s bias. The negatives cited by “impermanence” above never, to my attentive knowledge, happened in the US. Did they in Britain?
What WOULD be useful is a study to determine if and how the spectacularly successful actions taken by Iceland’s government could be replicated in US, UK, etc.
[A possible correction: the movie probably was from the UK.]
Attaboys to Buddy Rojak for reminding that Thatcher had to fight unions (government cronies) to save the British economy.
A revival of “Right to Work” law has popped up in a former union-Democrat Party controlled state. Tomorrow the Governor (one of 30 Republican governors of the 50 states) will sign a bill making Michigan the 24th RTW state* (passed by a legislature with Republican control of both houses, one of a majority of such states) to allow workers to opt out of union membership without being forced to pay dues. Right to Work is simply a protection of the individual worker against union coercion. It is opposed with the only argument possible — that unions should have the power/money of ALL workers in order to represent them against employers.
There is much US history** on this issue, including Pres. Eisenhower’s unique (and successful) direct TV appeal to citizens to contact their congressional representatives to allow states to enact RTW laws. Anything comparable in other nations?
* No doubt a mixture of cause & effect, but there is a near-100% correlation of RTW states having better employment, wages, growth than non-RTW.
** Employees of PRIVATE companies, including US plants of foreign automakers, have increasingly voted to have NO union, causing union-Democratic Party leadership to (UNsuccessfully) attempt to pass federal “check off” legislation DENYING workers a SECRET ballot. The great majority of union membership, money and political power is now in PUBLIC employee unions, where the employers (the PEOPLE) are represented by elected officials (POLITICIANS) in enterprises having no market competition and little financial constraints on meeting payrolls or retirement obligations. This has bankrupted two formerly prosperous states and several local governments. While only partly caused by unions, federal government pay and benefits are about TWICE those of comparable private jobs.
More big government, anyone??
Dec. 11 UPDATE: I tuned in to MSNBC, the 101% Democratic TV channel, just in time to catch their headline, “Governor signs anti-union* bill”. Obama appeared in Michigan to chant the old mantras of “Right to work for less*” and anti-labor (not anti-labor union) oppression. So I am assuming that the Michigan Right To Work bill is now law.
A Teachers Union sickout “strike” caused schools to close, a great lesson for the kids and a reminder that political power, not public service, is priority for public employee unions. Does anyone remember that labor LAWS (force of law) were enacted for “collective bargaining” on wages, workday hours,, workplace safety, etc., NOT to empower labor bosses to influence the product, e.g., public school curricula, or collect dues to buy partisan politics. [RTW simply denies unions the power to FORCE workers to pay dues, whether or not they want to join and have political contributions deducted from their paychecks].
* Yes, it’s anti-union all right, if one believes that unions, like Marxist/Fascist/theocratic government, must have absolute power over individuals. As to “less” (wages) and other benefits to workers, here is the 2001-2010 record of private-sector employment in RTW states (now 24 of 50) vs. non-RTW states: inflation-adjusted compensation +12.5% vs. +3.1%; private-sector jobs +2.4% vs. -3.4%.
Most of the health and safety businesses i.e. Safety nets vests harnesses hat scaffolding education programmes testing audit etc etc are owned by people involved in the union movement.
They are parasites who feed off the blood of workers and the businesses they slowly suffocate.
Pingback: Iceland: A multi-dimensional inspiration – Nadia |
Pingback: The Icelandic Success Story « THE INTERNET POST
Pingback: The Icelandic Success Story » Philosophers stone | Philosophers stone
Pingback: The Age of Ron Paul? The political/economic educator of our generation, worldwide « paulthepaperbear
Pingback: Lesson from Iceland « Market Owl
Seems to me that this article left out two very important details in this miracle “cure”:
1. the Iceland government nationalized (seized) the private savings of the people in order to help finance the “cure”;
2. government spending was a big part part of the problem…see anything about government being taken to the wood shed in this article for its role or its seizing of private savings?
Be very wary about simple solutions such as putting all the bankers in jail. It is window dressing to the real problems being solved.
I did talk about the problem of nationalisation. Eventually, it is better that the banks are back in private hands (tragedy of the commons). But nationalisation in the short term is much better than bailouts.
Also where did I say anything about putting all bankers in jail? Only culpable bankers should be jailed.
Pingback: We have a big exit in Iceland – DeCode Genetics | Startup Iceland
Debt isn’t just a financial obligation, it is also a moral one. Debtors should not be let off, they have made their beds and they should lie in them. Wealth and poverty are relative, why should the wise who lived within their means and forwent riotous living have to pay for the reckless and feckless? In Iceland, a community so small that everyone is related to everyone else, then perhaps it is a family matter, and debt might be forgiven, but in a large country like the USA or UK, then there is no reason why the prudent should not gain relative to spendthrift.
Well said, James! Another way to make the case for bottom-up vs. top-down government, individual liberty vs. tyranny, minimal government vs. socialism.
This comment is completely wrong. I don’t mean “inaccurate”; I mean “wrong”, immoral.
The respect of debt is a common mistake, especially among English common-law fanatics.
Rather than contract-law and respect for debt, the proper morals come from the Almighty, and are recorded in the scriptures. They’re much older than any of your modern ideas, and those countries who practice them most closely, flourish. The others die.
The Torah (the directions from on high) hold debt in very low regard, and require its forgiveness on a regular basis. Once you consider such a system, dynamically, you’ll note that there would be much less debt, overall, and lending would constrain itself mostly to those who are poor and in need. Genuine lending is either a form of quasi-charity, or else it is done among those very close to you, and represents common-wealth. (For example, it is common for family members to lend to one another; and the money only ever comes back if the borrower prospers.) To agree with you then, James, in an upright country there would be many fewer people who were able to “make their beds and lie in them”, regarding debt in the first place.
Lending at interest to your own neighbours and countrymen is a crime (a sin) in and of itself. But, “fractional reserve” lending (uneven weights and measures) is a further crime that is liable to get you lynched, in an upright society.
Having respect for debt is a mental/emotional problem. And, the first step to healing is to admit that you have the problem.
There was a currency crisis that started in the spring of 2008, and on 6 October trading in Iceland’s banks was suspended as the government battled to save the economy.
Here we have a proven model that works and passes the common sense test. The U.S., instead, has followed the path of Japan – a proven model also, but a highly different outcome.
Japanisation is totally crazy and totally failed but they were only acting on American advice at the time (after all, Japan is very much a US colony). Rooseveltian Resolve and all that.
Pingback: The Icelandic Success Story « Bobusnr
Pingback: There’s a Problem With Kicking the Can Down the Road « azizonomics
Pingback: Why Bernanke Is Wrong « alternative economics
Pingback: Laptop Millionaire Blog » Blog Archive » Help the people, imprison the banksters
The Icelandic solution was the right one for a small country whose banks’ debts would have overwhelmed the public balance sheet. Ireland should have done the same (was prevented by an EU leadership worried about the UK and German banking systems). However, if the US had done the same it would have been disastrous for the world economy. The US’s domestic mortgage market problems nearly brought down the global investment banking system. You really can’t export domestic risk on that scale and then walk away from it leaving others to pick up the tab.
So, bank debts haven’t overwhelmed the public balance sheet in the US? What do you think that quantitative easing is, other than transfer of bank debts, by the trillions, onto the Federal Reserve and/or Fannie Mae / Freddie Mac, and thus the government, and thus ultimately the taxpayer (and saver, via inflation)?
Breaking news (new to me at least): Michael Barone column: “Polling shows that voters say they will blame Republicans more than Democrats if we go over the fiscal cliff.”
That removes any uncertainty:
1. Democrats are in control.
2. Current Democrat leadership has consistently demonstrated that they care only about POWER, not the people, the middle class, the poor, not anybody but themselves and their cronies.
We will “go over the cliff”!
Pingback: Iceland Was Right, We Were Wrong: The IMF « Talesfromthelou's Blog
It is actually virtually 15 quite a few years considering that the to start with Ultrium cartridge has been arrived in the market industry consequently LTO1, Only two, 4,
3, along with Your five arrive with some other functions, rate, operation,
and even efficiency regarding valuable and even important information.
Generation x C7976A, could be the 6th version of
reputable and continuous LTO Ultrium marketing format.
HP brand new press tape better utilizing high-class level,
dispersion, uses just about the most innovative material fibers, and raises the starting roll film high-quality,
which usually enhanced having easier outside
together with facilitates to keep huge 3.5TB native and also 5.
25TB-compressed records regarding half inch broad along with 846M
extended tape. homepage pojistka definice homepage cartridge HP 901XL cartridges neomezená Moen Výměna cartridges tonery samsung ml-2525 lacné tonery prešov.
Very enjoyed to read this incredible story, thanks for this great blog.
Understand me on Twitting and on Instagram (@ezyville) be selected check out obtaining the Examiner Sneakers Facebook page and subscribe to each of Youtube channel which is full of enhancements and commentary you won’t see here.
Amazing story, it will be very interesting to learn more materials about Iceland’s history. Thanks a lot!
Hmm it seems like your blog ate my first comment (it was super long) so I guess I’ll just sum
it up what I wrote and say, I’m thoroughly enjoying your blog.
I as well am an aspiring blog blogger but I’m still new to the whole thing.
Do you have any tips and hints for newbie blog writers?
I’d definitely appreciate it.
whoah this blog is great i love studying your articles.
Stay up the good work! You already know, many people are hunting round for this information, you can aid them
I was recommended this website via my cousin. I am not
positive whether this submit is written via him as nobody else understand such precise approximately my trouble.
You’re incredible! Thanks!
certainly like your web-site however you need to test the spelling on quite a few of your posts.
Many of them are rife with spelling issues and I in finding
it very bothersome to inform the truth then again I’ll surely come again again.
Hey! I know this is somewhat off topic but I was wondering which blog platform are you using for this website?
I’m getting sick and tired of WordPress because I’ve
had problems with hackers and I’m looking at alternatives for another platform.
I would be fantastic if you could point me in the direction of a good
Heya are using WordPress for your site platform?
I’m new to the blog world but I’m trying to get started and set up my own. Do you need any
coding knowledge to make your own blog? Any help would be really appreciated!
I savor, lead to I found exactly what I used to be looking for.
You’ve ended my 4 day lengthy hunt! God Bless you man. Have a great day.
I have read so many articles concerning the blogger lovers but this article is
really a nice paragraph, keep it up.
whoah this weblog is wonderful i love reading
your posts. Keep up the good work! You know, a lot of individuals are searching around for this information, you
can aid them greatly.
Everything is very open with a clear explanation of the challenges.
It was definitely informative. Your website is extremely helpful.
Many thanks for sharing!
Hey! I could have sworn I’ve been to this website before
but after browsing through some of the post I
realized it’s new to me. Nonetheless, I’m definitely delighted I found it and I’ll be bookmarking and checking back frequently!
Great blog here! Also your web site loads up fast!
What host are you using? Can I get your affiliate link to your
host? I wish my website loaded up as fast as yours lol
It’s very easy to find out any topic on net as compared to textbooks, as I found this article at this
I have read so many posts concerning the blogger lovers except this piece of writing is really a fastidious paragraph,
keep it up.
What a information of un-ambiguity and preserveness of precious knowledge concerning unexpected feelings.
Hello to all, it’s really a pleasant for me to go to see this website, it contains useful Information.
Very soon this site will be famous among all blog people,
due to it’s pleasant content
If some one desires to be updated with most up-to-date technologies then he must
be pay a quick visit this website and be up to date everyday.
My partner and I stumbled over here from a different page and thought I should check things
out. I like what I see so i am just following you.
Look forward to looking into your web page repeatedly.
I am in fact grateful to the holder of this web page
who has shared this impressive paragraph at here.
Hello there, There’s no doubt that your blog could
be having browser compatibility issues. When I take a look
at your site in Safari, it looks fine however, if opening in Internet Explorer, it’s got some overlapping issues.
I just wanted to give you a quick heads up! Aside from that, fantastic blog!
Amazing! Its actually awesome paragraph, I have got much clear idea on the
topic of from this piece of writing.
This design is spectacular! You certainly know how to keep a reader amused.
Between your wit and your videos, I was almost moved to start my own blog
(well, almost…HaHa!) Excellent job. I really loved what
you had to say, and more than that, how you presented it.
I used to be recommended this web site by my cousin. I’m
not sure whether or not this submit is written by means of him as
no one else realize such distinct about my problem.
You are incredible! Thanks!
You can certainly see your skills in the article you write.
The sector hopes for more passionate writers such as you
who are not afraid to mention how they believe.
All the time go after your heart.
I go to see everyday some sites and information sites
to read content, but this weblog gives feature based
Remarkable issues here. I’m very glad to look your
post. Thanks a lot and I am taking a look ahead to contact you.
Will you kindly drop me a mail?
That is a really good tip especially to those new to the blogosphere.
Brief but very precise information… Thanks for sharing this one.
A must read post!
When I initially left a comment I appear to have clicked on the -Notify me when new comments are added- checkbox and now
each time a comment is added I recieve four emails with the exact same comment.
Is there a way you can remove me from that service?
Magnificent beat ! I would like to apprentice while you amend your site, how could i subscribe for a weblog website?
The account aided me a appropriate deal. I were a little bit familiar of this your broadcast provided bright transparent concept
Hello my loved one! I wish to say that this post is awesome, great written and come with approximately all vital
infos. I’d like to look more posts like this .
Pingback: The Küle Library
Hi! I’ve been following your site for a while now and finally got the courage to go ahead and give
you a shout out from Austin Texas! Just wanted
to mention keep up the fantastic job!