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View Diary: Election Time in Iceland: A Zombie Constitution To The Left, Pirates Sailing To The Right (68 comments)

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  •  I only brought up Icesave because it was (0+ / 0-)

    emblematic of the capital inflows that were characteristic of every single crisis country without fail. Every single one that went into crisis after the 2008 meltdown was a country that had run a longstanding current account surplus and Iceland or even the USA were no different. I'm not all that familiar with the particulars other than that a lot of the money was owed to foreign creditors and the Icelandic government didn't think it was worth en-debting itself to them through a bailout the way Ireland did to German/Dutch/British-etc. banks with its bailout. That's why I brought it up.

    And additionally, yes I realize devaluation is horrendous if you have a lot of debt denominated in a foreign currency as do economists like Krugman et al. It's just that it's far better to have debts in a foreign currency and a job that's going to over time (in this case a long time sadly) pay more than it is to be in the situation of a much higher proportion of the Irish/Spanish/Baltics who have debts in the denomination of a currency your country can't control and lose your job and see all of your friends/family lose their jobs in the way that many if Greece, Ireland, Spain, the Baltics, and the European Periphery did.

    Don't get me wrong, I seriously do empathize with the plight of those in Iceland and I think it's horrible that the EU and the US (and to a lesser extent Japan) didn't do more to help mitigate the crisis, but what the Icelandic government did was absolutely the best response given the limited options available. What else were they possibly going to do that wouldn't hurt more in the long term? I totally think that those who were wealthy in all of those countries should have payed more to help those who weren't, but that just sadly wasn't an option.

    The true fault lies with those in the United States and Germany and similar surplus countries who where the proponents of policies that helped the elite and only the elite and that's a very hard proposition to stick to, even if it is one that you and I both agree to. Those were the people who thought that unlimited capitalism, i.e. unlimited power of investment, was the way to go, and the fact that bubbles can come and pop proves otherwise.

    •  No, Icesave was not like that (0+ / 0-)

      Icesave accounts were private accounts, mainly small dollar private reirement accounts and municipal funds.  And the conflicts was not with creditors, but between governments, because the British and Dutch bailed out their people and then demanded recompense.  Private creditors never came into the picture.  And the accounts were never government backed, unlike pretty much everywhere else.  The Icelandic govermnent was required, like everyone, to create a system for backing them, but the system they created was a private fund.   And it was proven that Icesave was not a government-backed account system because EFTA court ruled specifically that.

      And additionally, yes I realize devaluation is horrendous if you have a lot of debt denominated in a foreign currency as do economists like Krugman et al. It's just that it's far better to have debts in a foreign currency and a job that's going to over time (in this case a long time sadly) pay more
      Except that not only did our unemployment rate shoot way up compared to our norms (something Krugman always distorts), and is still very high compared to our norm despite being nearly half a decade after the crisis, but that "pay more" job you talk about is effectively paying a whole lot less because the price of all goods is now higher.

      Oh, and did I mention the austerity, too?

      Sorry, it just gets tiring hearing people talk about how wonderful a currency collapse is.  It's not wonderful.  It sucks.  I see it all over the place.  Don't get me wrong, it serves me well.  It makes all the assets I brought over worth more, and there's all sorts of property for sale from people who lost everything when they could no longer afford it.  But obviously that's small comfort for the other side of the equation.

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