Iceland’s Recovering? Without Bailouts? Hmmm.
The basket case country cut spending and used bankruptcy, not stimulus.
February 17, 2012 - 8:46 am
Quick, important post at Zerohedge makes an observation the administration would prefer you avert your eyes from:
While Greece and Europe continue sinking ever deeper into the colonial quicksand of Pax Goldmania, Iceland, which blew up, pushed its banks into bankruptcy, and arrested its corrupt bankers, is well on its way to being the world’s only normal country.
To save Mr. Krugman the effort of a column, a summary of his probable analysis:
Iceland is a nuanced situation. Like Wisconsin and Texas and Germany.
Bailouts, otherwise known as BOOS, their real purpose is to bail out Obama’s supporters: GM, Chrysler for union votes; Solyndra-Kaiser, Perelman for bundles of money. BOOS is an unqualified success that will haunts the taxpayers for years.
If we arrested our corrupt bankers, they would be forced to testify about the extortionary tactics that the government itself put on them in the Community Reinvestment Act. That ain’t gonna happen.
So you think that by Icelanders rejecting to pay the British and Dutch is comparable to what happened in the US? Wow that’s a stretch. As you are no doubt aware the British and Dutch wanted full repayment for their going in to bail out the iceland banks in the beginning. They had already gotten close to 90% back but wanted it all and the Icelanders told them exactly where they could collect it – from the bondholders hide as they should.
However why do you think having the largest banks fail in the US is even comparable? What your thinking there? Who would absorb those losses? We know British and Dutch banks could for Iceland but who would absorb ours? Just asking.
re: largest banks, etc. (TBTF)
Simply means wait for it. The least of us will suffer the most while the elites switch from Sachs to Target. But the wealthy have always been the most economically (downward) mobile (grin and grimace). (notice how the government likes to participate on the upside but not the downside?)
The bankruptcy system and judges would have figured it out. Else we end up with nationalization and political processes substituting for the market (John Taylor’s rule of discretion v. rule of law/certainty). And long term suffering v. a sharp dislocation and adjustment while those that thought there was a free lunch (from the smallest real-estate speculator to the quants who thought they could print money w/ derivatives) get their just rewards.
And if it turns out that pension funds and the entitlements are reduced by the judges to 20 cents on the dollar, that’s only a return to the first part of the 1900s where families and neighbors (and fraternal societies) took care of their own. Call it a time of a more civil society. A radical disaggregation of governance can solve all these issues (as the Swiss discovered) – even as it returns competition to governance (heaven forbid that SFO-ites can tell the central valley how to farm – and live, and v. v.). Amazing that we continue to tolerate 50M+1 deciding so many issues for the 50M-1. Where if a special interest can convince 500-1000 Canton-sized near sovereign U.S. political districts to do something, it’s no longer a special interest.
And maybe next time we’ll be wiser in terms of allowing our representatives to put thumbs on the various market scales to achieve some goal v. the harder approach of convincing us all that we should tax ourselves to address the need directly.
We’re due for 20+ years of Japan style stagflation. No magic in QE other than deferring what will eventually be even more painful corrections (“please, Lord, let the crash come after the next election”). Granted, we seem to have been willing to accept the averaged-out 4% annual inflation we’ve seen since 1970. A pity. Especially since wealth (and energy) available to an individual (and family and neighbor) determine who survives in a catastrophe, natural and man-made. Then again, most folks can’t imagine the costs of these sins of omission – the “what could have been” if we’d let free-will, free-markets of free-citizens and their enterprise rule themselves, vice attempting to perfect them and society (i.e. admit that the three alternatives to allocating resources for the greatest common good are all faiths, and markets with all their blemishes always have better outcomes – especially if corrections are implemented outside the market mechanism, v. thumb-on-the-scale).
Granted, the Soviet Union would have done just fine if there wasn’t an alternative visible save for the history books recounting just how terrible those corrupt old systems where. What’s unknown can’t be missed.