Iceland vs. the rest of the world

Matt in the Hat · Aug 28, 2012

Guess Who’s Emerging From the Crisis?

http://krugman.blogs.nytimes.com/2012/06/13/guess-whos-emerging-from-the-crisis/

GDP is still below previous peak, but I think one could argue, much more so than in say America, that a significant part of that peak involved a Ponzi financial sector that isn’t coming back.
I think I was one of the first outsiders to notice that Iceland’s heterodoxy was yielding a surprisingly not-so-terrible post-crisis outcome.
And yes, the recovery is better than Estonia, and much better than Latvia.
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and a previous blog from Krugman...

http://www.nytimes.com/2011/10/28/opinion/krugman-the-path-not-taken.html

So bailing out the banks while punishing workers is not, in fact, a recipe for prosperity. But was there any alternative? Well, that’s why I’m in Iceland, attending a conference about the country that did something different.

If you’ve been reading accounts of the financial crisis, or watching film treatments like the excellent “Inside Job,” you know that Iceland was supposed to be the ultimate economic disaster story: its runaway bankers saddled the country with huge debts and seemed to leave the nation in a hopeless position.

But a funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. 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. 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 maneuver.

So how’s it going? Iceland hasn’t avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. “Things could have been a lot worse” may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph.

And there’s a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary. If this is a time of incredible pain and a much harsher society, that was a choice. It didn’t and doesn’t have to be this way.
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You all know that I have fundamental differences of opinion with Paul Krugman and it's actually amazing to see him vindicate the opinion that me and other anti corporatists held in 2008/9.

This message is deadly to the duopoly

JohnR · Aug 28, 2012

Krugman has crushed it since 2008. Called out Ryan on inflation. He won, Ryan lost. Called out Paulson on economic strength, ditto. Called out Bill Gross last year on Treasury yields, ditto. Been consistently correct on the Euro, been consistently correct in predicting that austerity measures in Europe would hamper growth and would spark a backlash by voters.

People carp at him because they have pre-existing views that disagree with Krugman's, and they are pissed that he's been correct and they are not. In defiance, they double down on being wrong. Hell, Paul Ryan's been wrong about inflation his entire adult life, and that doesn't change his views. No exaggeration there by the way. Ryan turned 18 in 1988, shortly thereafter came under the influence of a college professor who convinced him about the need for hard money and that inflation would be rising due to the Fed being too lenient, and ever since then he's been expecting inflation that hasn't arrived.

Me, I don't care. My self worth isn't defined by whether I can predict macroeconomic events, or whether Keynes is a useful economic guide, or any of that stuff. I stand on the sidelines and watch the discussions. And what I see is Krugman making monkeys out of ideologues who dislike him for being too "partisan." Absolute chumps they look.

soccernutter · Aug 28, 2012

Ya know Matt, for all your posturing on letting corporations fail, you also say that the government should be involved in people's lives. Well, in Iceland, they are. What do you think a social safety net means?

Matt in the Hat · Aug 28, 2012

soccernutter said: ↑

Ya know Matt, for all your posturing on letting corporations fail, you also say that the government should be involved in people's lives. Well, in Iceland, they are. What do you think a social safety net means?
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I'm starting to think that you would rater assume what I believe than actually reading my posts. I've always advocated for a safety net to mitigate against the unlucky lottery.

ceezmad · Aug 28, 2012

Iceland and Ireland (bailed banks out) will make interesting economy case studies.

soccernutter · Aug 28, 2012

Matt in the Hat said: ↑

I'm starting to think that you would rater assume what I believe than actually reading my posts. I've always advocated for a safety net to mitigate against the unlucky lottery.
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I don't recall you saying that, and without comment above, I was going on the basis of you general belief in lack of government interference.

But, thank you for making that clear. Curious, do you happen to know what Iceland's safety net currently is versus what it was?

dapip · Aug 28, 2012

Not to say that I'm smarter than Krugman, but back in 2008 I had this conversation with a co-worker and my take on the whole financial crisis was to bail out the homeowners by condonning part of the debt or making the government owner of a percentage of the loans and charge no interest for 5 years or so...

I knew better because something similar happened in my country of origin and when the banks were bailed out, they acted in pretty much the same way as American banksters did.