Three years after Iceland's banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.
The North Atlantic island saw its three biggest banks go belly-up in October 2008 as its overstretched financial sector collapsed under the weight of the global crisis sparked by the crash of US investment giant Lehman Brothers.
The banks became insolvent within a matter of weeks and Reykjavik was forced to let them fail and seek a $US2.25 billion ($A2.17 billion) bailout from the International Monetary Fund.
The debts racked up by Iceland's banking sector greatly outweighed the country's GDP:
Iceland's banking sector had assets worth 11 times the country's total gross domestic product (GDP) at their peak.
Nobel Prize-winning US economist Paul Krugman echoed Bentsson.
"Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net," he wrote in a recent commentary in the New York Times.
"Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to manoeuvre," he said.
What would Americans have said if TARP, for which banks still owe $146 billion, were put to a referendum? If the calls to Congress against the measure are any indicator it would have resembled Iceland's 98% No vote:
A measure of patriotism feeds the hope that they would have made their opposition known as resoundingly as have the voters of Iceland, who on Saturday rejected demands by the United Kingdom and the Netherlands—working hand-in-hand with the rapacious International Monetary Fund—that the people of the tiny island nation cover losses triggered by the failure of a private bank.
A "yes" vote on Saturday's referendum would have saddled each citizen of Iceland with $16,400 of debt, with the money to be paid to compensate the British and Dutch governments for expenditures to cover depositor losses stemming from the failure of the Icelandic bank Icesave. […]
Fortunately, Iceland is a democracy. So those farmers and fishermen, taxpayers, doctors, nurses, teachers got to decide whether they were inclined to pay for a bank bailout.
They shouted "no" as loudly as that word could be uttered.
An early analysis suggests that roughly 98 percent of the Icelanders who cast valid ballots rejected the "deal."
What doomed fate awaits countries like Ireland, with the world's worst debt to GDP ratio of over 1000%, if they refuse to pay extortion to the international banking cartel? How about the horror of a clean balance sheet and prospering economy?