Iceland lets banks fail, jails bankers: Economy booms

[daviddee]

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[daviddee]

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[Zippyjuan]

http://www.spiegel.de/international...f-iceland-a-case-worth-studying-a-942387.html

Iceland's rapid return to health hinged on a series of measures that Nobel laureate Paul Krugman later referred to as "doing an Iceland." Krugman, an admirer of Iceland's dramatic comeback, has recommended a similar policy cocktail for other nations in crisis. The rules are as follows: Allow your ailing banks to collapse; devalue your currency if you have one of your own; introduce capital controls; and try to avoid paying back foreign debts.

What, then, can one learn from Iceland? Pride comes before the fall? Stick with what you know? The equally euphoric and oppressive feeling one gets is that this island nation is completely unique. One can take very little home aside from a few photographs. No applicable lessons. What goes wrong here can be fixed more quickly than elsewhere. What works here is difficult to copy in places where the situation is larger and more complex.

At the same time, Iceland is isolating itself further. One of the first things the new government did was to put EU accession negotiations on ice. Iceland on its own is enough, seems to be the message.

The Icelanders' new, solitary happiness, however, is also dangerous. Economist Ásgeir Jónsson fears "economic and mental isolation" for his country in the future. Foreign investors, as badly as they are needed, are scarce and export levels are insufficient. His fellow citizens, Jónsson observes, hardly seek to inform themselves anymore about the goings on in the rest of the world. "But we have to open ourselves to the world; otherwise we will definitely go under in the next crisis."

Nobody is willing to invest or trade with them.

 

[Zippyjuan]

On the possible relaxing of capital controls:

http://www.reuters.com/article/2015/04/02/us-iceland-economy-insight-idUSKBN0MT0WE20150402

The collapse infuriated some European countries which were left on the hook for billions of dollars in compensation to depositors in failed Icelandic banks, and left Iceland shunned by Western nations in its hour of need.

At the low point in October 2008, Britain used anti-terrorism legislation against the country - forcing international bankers to pick up their bags in the middle of crisis meetings and head to the airport.

Now, Iceland hopes that by finally lifting capital controls it can draw a line under the crisis, restore its credit rating, lower its borrowing costs, boost its economy and revive the living standards of its 330,000 people. But to do so, it must find a way to let investors withdraw funds without provoking a catastrophic stampede.

Officials say they will put rules in place to ensure a managed, not free, float of the currency. The government is considering taxing the removal of cash to prevent an exodus. And it will clip the wings of domestic banks to make sure a similar crisis can never happen again.

"We're talking here about the third largest bankruptcy in the history of mankind being unwound in one of the smallest countries," the country's central bank governor, Mar Gudmundsson, told Reuters in a recent interview in Reykjavik.

That means allowing investors with assets in crowns to sell them for hard currency and take their money abroad. But to avoid a new run on the crown, the central bank needs to act carefully.

Officials say they will deal separately with three categories of investors: creditors of the estates of the three failed banks, other foreign investors with assets trapped in Iceland and domestic savers looking to invest abroad.

First up will be the creditors of the failed banks, mostly hedge funds that bought obligations on the secondary market. Iceland wants to avoid a long legal fight, but officials say ultimately rules will be imposed and not negotiated, noting it is private debt, not sovereign.

To keep all the funds released in the settlement from leaving the country at once, Iceland is considering an exit tax, or "stabilization tax", officials said.

They hope to make an announcement on the estates of the banks within weeks, or at least before the end of May when the world's oldest parliament, which would have to approve the deal, breaks for recess.

A separate deal will be offered to foreign investors whose capital has been stuck in Iceland since controls were imposed in 2008. Foreign capital has leaked out over the years via currency auctions, partly in exchange for long-term investment into Iceland, and now amounts to 15 percent of GDP, or around $2.2 billion, from 40 percent five years ago.

Investors may be offered various schemes to keep their capital in Iceland, with "an option for currency, an option for different bonds in different currencies with different maturity dates", Finance Minister Bjarni Benediktsson told Reuters.

Officials said it was too early to say if they would also be offered physical assets, such as Iceland's giant geothermal industry. The government says privatization is not on the table.

Those who want to withdraw immediately would have to sell their crowns at a discount through the central bank's foreign currency auctions. The bank said it had not yet ascertained which proportion of the $2.2 billion would exit early.

Finally, domestic institutions will be permitted to invest abroad. While this comes last on the list, officials say it is important to allow institutions and the state's own big pension fund to diversify away from Icelandic assets.

The proposed "stabilization tax" to encourage money to be left in the country is a 39% fee on funds taken out of Iceland.

 

[devil21]

Throwing the thieves in jail is a good first step for fraud and crimes against humanity. The rest will sort itself out.

 

[TheCount]

I'd like some citation on Icelandic banking to back some of these claims.

You didn't seem to need any citations for the claims in your original video. I don't know why you'd be shocked that RT would push how awesome socialism is.

 

[Danke]

You are delusional.

Please show me where the USA enacted capital controls, bailed in banks with depositors cash, etc.

Iceland is a great road map for just how bad a govt can fuck its citizens and foreign investors in the blink of an eye.

Cyprus followed their lead with bail-ins and capital controls. Cypress was an "Iceland-Lite" though... as we still have not seen the full carnage of those still trapped inside Iceland's financial institutions. Imagine your entire networth locked in a country and you yourself are trapped because a govt tells you that you can't take your money and leave. Then they inflate the money to the moon which further destroys your savings... and you can't do anything. Smell like Freedom?

Watch in the near future that Greece too will follow Iceland's lead.

Yay Iceland is awesome and should be a model for the world. Iceland is a success story for massive government overreach and for the Socialists who believe that filthy capitalist's money is theirs to take. They own you, your money, etc. and if you don't like it there is -zero- you can do about it. Success story... Iceland.

What are you smoking dude?

Bank bail outs cost every American a lot, that includes "depositors." How many trillions are we up to now?

 

[PierzStyx]

Makes sense, instead of propping up malinvestment with money taken from taxpayers you let it fail. Crashed banks sell off their assets to healthier banks and recovery begins as better businesses offer better services and fill the public need. Even a place as socialist as Uceland got this one correct.

 

[daviddee]

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[daviddee]

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[osan]

[video=youtube;oZ-DLIWCfAI]https://www.youtube.com/watch?feature=player_embedded&v=oZ-DLIWCfAI[/video]

BURN THE WITCHES! BURN THEM ALL!!!

 

[osan]

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford

That was then.

This is now. People would do nothing. Hell, 80% would not even complain about it.

 

[Zippyjuan]

BURN THE WITCHES! BURN THEM ALL!!!