Skip to main content

Are Europe's PIIGS destined for economic slaughter?  The only way to avoid the austerity “death spiral” may be to take a lesson from Iceland and let the banks go bust:

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?


EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site