I've known that Iceland's "anti-austerity" program of the past few years, where they made bondholders rather than taxpayers take the fall for the errors of the banks, is widely considered to be an economic success story. What is news to me is that, apparently, the International Monetary Fund (IMF) has admitted it. That strikes me as very big, and here in the U.S. very under-reported, news.
Here's how I come by the story: a single Facebook post from an old friend at Michigan tonight of a story that came out Tuesday night. That site, which seems a bit overheated for my taste, led me to an August 15 from The Street. That in turn led to a source from which I would not have expected, Bloomberg BusinessWeek, and it seems to check out.
Can it be? The IMF admitted that it was wrong about austerity?
Unlike most stories, this one seems to have traveled from the establishment media to the relative fringes. Working backwards in time, this is the first story I received, from a news service with the disturbing name of "Silver Gold Bull":
For approximately three years, our governments, the banking cabal, and the Corporate Media have assured us that they knew the appropriate approach for fixing the economies that they had previously crippled with their own mismanagement. We were told that the key was to stomp on the Little People with “austerity” in order to continue making full interest payments to the Bond Parasites — at any/all costs.The author, Jeff Nielson, also wrote the previous piece in "The Street," and since it was published twice separately in slightly different forms, I think that i get to go on quoting him:
Following three years of this continuous, uninterrupted failure, Greece has already defaulted on 75% of its debts, and its economy is totally destroyed. The UK, Spain and Italy are all plummeting downward in suicide-spirals, where the more austerity these sadistic governments inflict upon their own people theworse their debt/deficit problems get. Ireland and Portugal are nearly in the same position.
Now in what may be the greatest economic “mea culpa” in history, we have the media admitting that this government/banking/propaganda-machine troika has been wrong all along. They have been forced to acknowledge that Iceland’s approach to economic triage was the correct approach right from the beginning.
What was Iceland’s approach? To do the exact opposite of everything the bankers running our own economies told us to do. The bankers (naturally) told us that we needed to bail out the criminal Big Banks, at taxpayer expense (they were Too Big To Fail). Iceland gave the banksters nothing.
The bankers told us that no amount of suffering (for the Little People) was too great in order to make sure that the Bond Parasites got paid at 100 cents on the dollar. Iceland told the Bond Parasites they would get what was left over, after the people had been taken care of (by their own government).
In fact, from the moment the Crash of '08 was orchestrated and our morally bankrupt governments began executing the plans of the bankers, I have written that the only rational strategy was to put People before Parasites. While I wouldn't expect national policymakers to take their cues from my writing, when I wrote out my economic prescriptions for our economies I didn't base my views on compassion, or simply "doing the right thing."Nielson's withering attack is on this seemingly benign story from the mainstream financial media. Here's a taste of that:
Rather, I have consistently argued that it was a matter of simple arithmetic and the most-elementary principles of economics that "the Iceland approach" was the only strategy which could possibly succeed. When Plutarch wrote 2,000 years ago "an imbalance between rich and poor is the oldest and most fatal ailment of all Republics," he was not parroting socialist dogma (1,500 years before the birth of Socialism).
... [Interesting section on Plutarch's economic excised; go find it at the link.]
So when the Bloomberg Revisionists attempt to convince us that Iceland's strong (and real) economic recovery was a "surprise"; this could only be true if none of our governments, none of the bankers and none of the media's precious "experts" understood the most-elementary principles of arithmetic and economics. Is this the message the media wants to convey?
... [Skipping ahead a bit again to the less cheery part]
One can only assume that neither the Corporate Media nor their Banker Masters would have allowed this clear acknowledgment that Iceland was right and we were wrong to appear within its own pages, unless it felt secure in the knowledge that all the remaining Debt Slaves had been crippled beyond their capacity to ever escape this economic oppression.
Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.Judging from my Google search (on "Daria V. Zakharova, IMF") this Business Week article has made a bit of a splash, but seemingly in relatively out-of-the-way sites. Wonkette noticed it, suggesting that we "take it with a grain of salt" giving Iceland's "liberal bias." Balloon Juice had a tasty quote from it and raised a victory flag for Krugman. Digby did much the same on Sunday. Democratic Underground had it almost as soon as it came out, but it fizzled. And none of these sites had Jeff Nielson's provocative analysis that this was just coming out into the mainstream media now because it was now too late to do anything about it. (I found one mainstream daily newspaper covering it among the first 30 entries, the San Francisco Chronicle -- and that story was unavailable. Hmmmm....)
Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.
“Iceland has made significant achievements since the crisis,” Daria V. Zakharova, IMF mission chief to the island, said in an interview. “We have a very positive outlook on growth, especially for this year and next year because it appears to us that the growth is broad based.”
Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy. The island’s subsequent decision to shield itself from a capital outflow by restricting currency movements allowed the government to ward off a speculative attack, cauterizing the economy’s hemorrhaging. That helped the authorities focus on supporting households and businesses.
“The fact that Iceland managed to preserve the social welfare system in the face of a very sizeable fiscal consolidation is one of the major achievements under the program and of the Icelandic government,” Zakharova said. The program benefited from “strong implementation, reflecting ownership on the part of the authorities,” she said.
Well, happily, Nielson may have spoken too soon, because this story seems to have sped right towards the national memory hole, which suggests that maybe it's not too late. If nothing else, it's a good chance for us on Team Krugman to take a victory lap for anti-austerity. But, more than that, we seem to be in some sort of Presidential election thingy, and it's a good time to struggle for hearts and minds. I think that it's time to make this story better known -- along with Jeff Nielson's trenchant and more radical critique!
Obama, with his Geithner ties and such, is somewhat vulnerable on issues related to the big banks, but that doesn't overly worry me: he's now put on his populist cap and there's no way he'd be worse than Romney on austerity issues. Maybe this story is missing something -- I hope that some here will say so if so -- but if it's true that the IMF issued such a mea culpa, shouldn't we be shouting this success for the anti-austerity approach from the rooftops? Shouldn't this be a flaming arrow for our quiver in this fall's campaign?
8:06 AM PT: The interests of ferrenballanz (and my diary title itself) demand that I refer you to a comment below. Writing from Iceland itself, Nordikosack Rei pulls out the Scandinavian debunkenstik and provides us with an alternative viewpoint that challenges much of this story, but still leaves us much to think about. (Foremost: but the IMF rep did say this, right? And, in the worst case, are there still political lessons for us here? Does it change for the better how Americans might think about austerity?) Thanks to all for the good discussion -- and yes, all of the italicized words in this update are made up!