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Iceland Shows Other Europeans How to Survive Bankruptcy
Reason via Instapundit ^ | 7 Sep 2012 | Matthew Feeney

Posted on 09/10/2012 6:04:04 AM PDT by shove_it

Taxpayers in Europe (and the United States) who have been terrorized since 2008 by government officials warning about economic armageddon, catastrophe, and pestilence should look to tiny Iceland for a taste of how little there is to fear when the experts can't save the people.

Christine Lagarde, managing director of the International Monetary Fund, recently branded Iceland’s economic performance "impressive." In the last few years the small island in the north Atlantic has managed to shrink its deficit, reduce unemployment, and allow its economy to grow.

[...]

(Excerpt) Read more at reason.com ...


TOPICS: Business/Economy; Crime/Corruption; Extended News; Foreign Affairs
KEYWORDS: bankrupt; broke; debt; iceland

1 posted on 09/10/2012 6:04:07 AM PDT by shove_it
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To: shove_it

That’s like the town of Podunk explaining to Chicago how to not deficit spend.

Iceland did what worked for Iceland, that does not mean it will work for a nation with 50x its annual budget.


2 posted on 09/10/2012 6:09:56 AM PDT by Abathar (Proudly posting without reading the article carefully since 2004)
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To: shove_it
Christine Lagarde, managing director of the International Monetary Fund, recently branded Iceland’s economic performance "impressive." In the last few years the small island in the north Atlantic has managed to shrink its deficit, reduce unemployment, and allow its economy to grow.

Exactly how does one's shirking of debt, outright denial and refusal to pay such constitute "impressive?.....

Impressive in the fact that it is much like many of Obama's former homeowners who shirked their debt, demand 'help' and complain about mistreatment?

Sorry, but I don't buy "impressive".....they just ignored their debt and rejected it, dealing for better bankruptcy terms with the rest of the world......

http://www.guardian.co.uk/world/2011/apr/10/iceland-icesave-debt-repayment-no-vote

3 posted on 09/10/2012 6:13:20 AM PDT by Gaffer
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To: Abathar

I’d wager they have a pretty homogenous population with a much smaller portion on the dole and assorted entitlements.


4 posted on 09/10/2012 6:14:12 AM PDT by Tijeras_Slim
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To: Abathar

The reason it worked was because the depositors in Icelandic banks mostly lived in other countries. They could just shut down the banks and tell the depositors to go pound sand.

It is a very different thing if the depositors live in the country where the banks are located.


5 posted on 09/10/2012 6:14:59 AM PDT by proxy_user
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To: Gaffer

Why should the government put the taxpayers on the hook for bad bets made by investors, on their banks? Put another way, under what other circumstances should investors be bailed out by taxpayers when their investments go wrong? In Iceland’s case, the government wanted to make the people pay for bad investments, and instead the people rose up and replaced the government. How does one argue from a position of limited government and individual responsibility that this was an error?


6 posted on 09/10/2012 6:17:21 AM PDT by coloradan (The US has become a banana republic, except without the bananas - or the republic.)
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To: Tijeras_Slim

That is a big part of it. Icelanders are for the most part a family oriented hard working people.

There haven’t been enough really rich ones that have been forced to support the lazy ones either, which is the biggest difference I think.


7 posted on 09/10/2012 6:22:30 AM PDT by Abathar (Proudly posting without reading the article carefully since 2004)
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To: coloradan

And, when this country is forced to disavow and denounce its massive debt to China, Saudia Arabia, et al, because its people now don’t ‘like’ the government it voted in did something stupid, will it be an ‘error?’


8 posted on 09/10/2012 6:24:07 AM PDT by Gaffer
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To: coloradan

Your point is correct, but obviously several posters don’t understand the issues at all.


9 posted on 09/10/2012 6:27:32 AM PDT by achilles2000 ("I'll agree to save the whales as long as we can deport the liberals")
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To: Gaffer

EU depositors from France, Great Britain, Holland, Germany etc lost 5 billion dollars when Icelandic banks collapsed. These depositors were made whole by France, Great Britain, Holland, Germany etc.

Iceland gov’t was then presented with a bill for 5 billion dollars. Icelandic citizens revolted and voted a big no. A big no to be taxed to pay for the sins of privately owned Icelandic banks.

EU has threatened to punish Iceland but so far nothing. There were rumblings about keeping Icelandic fish imports out of Europe but nothing so far


10 posted on 09/10/2012 6:27:41 AM PDT by dennisw (Government be yo mamma - Re-elect Barack Obama)
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To: Gaffer

That particular problem already has a planned “solution” which is to devalue the dollar. That, too, steals from taxpayers but only those who have not positioned for it, as opposed to everyone as in 2008 (everyone except the Icelanders, that is).


11 posted on 09/10/2012 6:31:58 AM PDT by coloradan (The US has become a banana republic, except without the bananas - or the republic.)
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To: dennisw

Well, disavowal of the greedy Icelandic banking system and its government they certainly ‘tolerated’ during the ‘good years’ is one way to offer excuse. They certainly improved their bargaining position with the debt holders, for sure.

The trick is to see how long the memories of the debt holders is when it comes time for Iceland’s need to expand and grow with outside investment. I wouldn’t lend them a plugged nickel.


12 posted on 09/10/2012 6:33:56 AM PDT by Gaffer
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To: coloradan
That, too, steals from taxpayers but only those who have not positioned for it....

Exactly how might one have "positioned" himself for it? Buy a Chebby Volt? Does he not eat bread, milk, butter, eggs, meat? What? Heirloom seed gardening, gold, guns, ammo? The truth is that government will find a way to make everyone pay. Taxes on property, confiscation of wealth found, etc.

13 posted on 09/10/2012 6:41:40 AM PDT by Gaffer
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To: Gaffer

“Sorry, but I don’t buy “impressive”.....they just ignored their debt and rejected it, dealing for better bankruptcy terms with the rest of the world...... “

No they didn’t they ignored private banks debt, and demands that the whole of Iceland bail them out.

That was indeed impressive, and leaves them alone among nations of late who demand that those who live by risk also die by it without burdening the taxpayer.

We should have done the same.


14 posted on 09/10/2012 6:41:44 AM PDT by RFEngineer
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To: RFEngineer

We differ in opinion.


15 posted on 09/10/2012 6:45:20 AM PDT by Gaffer
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To: coloradan

+1


16 posted on 09/10/2012 6:46:18 AM PDT by dfwgator (I'm voting for Ryan and that other guy.)
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To: RFEngineer

Hear here. BRAVO!


17 posted on 09/10/2012 6:49:12 AM PDT by shove_it (DNC = perpetual emotion machine)
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To: coloradan

Well, it is a very different thing when the ‘investments’ are deposits in checking accounts.

Suppose Citicorp went broke and the US government did nothing. If GM or GE had their payroll accounts there, guess who wouldn’t get paid this month?


18 posted on 09/10/2012 6:54:40 AM PDT by proxy_user
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To: coloradan

Well, it is a very different thing when the ‘investments’ are deposits in checking accounts.

Suppose Citicorp went broke and the US government did nothing. If GM or GE had their payroll accounts there, guess who wouldn’t get paid this month?


19 posted on 09/10/2012 6:54:52 AM PDT by proxy_user
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To: Gaffer

“We differ in opinion.”

We do, but we shouldn’t - using your points, I think I can perhaps find a way you can agree with me.

If you buy a house with a subprime mortgage, then can’t pay for it, I think you’d agree that it’s your problem, it’s not a problem for the US taxpayers.

That’s Iceland.

The purchase of Mortgage Backed Securities by the Fed, and the pretending that your house, even though you haven’t made payments in years and are still living in it, thereby receiving a direct subsidy that is paid for by every US taxpayer (and every future taxpayer for some time to come)

That’s the US.

Iceland refused to backstop private businesses that incurred steep risks to increase private profits when the bets go bad.


20 posted on 09/10/2012 6:56:51 AM PDT by RFEngineer
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To: Abathar
exactly. Iceland's population is 321,000 people -- smaller than many cities.

They are also pretty much one ethnic stock and have gdp of $12 billion.

What they have done is admirable, but difficult to implement in bigger countries.

21 posted on 09/10/2012 7:06:31 AM PDT by Cronos (**Marriage is about commitment, cohabitation is about convenience.**)
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To: Gaffer

How would you feel if the American government was going to raise your taxes to pay off Chinese depositors who put money in an American bank that offered really nice interest rates. And that bank went bust?

Under our system the Feds would raise your taxes to pay those Chinese. Paying EU depositor 5 billion was too onerous for Icelanders to tolerate


22 posted on 09/10/2012 7:08:33 AM PDT by dennisw (Government be yo mamma - Re-elect Barack Obama)
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To: Gaffer

I think it wasn’t a denial by the Icelanders to pay their debts. They were not bound to secure the losses of their banks I think, but I’m not sure about that


23 posted on 09/10/2012 7:11:30 AM PDT by Cronos (**Marriage is about commitment, cohabitation is about convenience.**)
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To: Gaffer

The first proposal to pay back the UK, and also the Netherlands, was overwhelming rejected in January 2010 by 93pc, as the island nation’s population objected to being punished for the woes of their banking industry and the high interest rates of 5.5pc.

Iceland rejects UK repayment deal
Iceland has rejected new proposals to pay back the £2.3bn that Britain spent on compensating savers when internet bank Icesave collapsed, according to early results of a referendum last night.

Broadcaster RUV estimated that 63pc of voters rejected the deal in a referendum, while the Icelandic prime minister and finance minister admitted the “no” side “appears” to have won.

The “no” side had campaigned that the agreement would put “an incredible financial burden on Icelanders” and insisted “there never was any legal obligation for Icelandic citizens to shoulder the losses of a private bank”.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8440938/Iceland-rejects-UK-repayment-deal.html


24 posted on 09/10/2012 7:11:39 AM PDT by dennisw (Government be yo mamma - Re-elect Barack Obama)
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To: shove_it

Iceland survived basically by telling the international banking community to go cram one up their backsides.

If the rest of the world follows suit its gonna be chaos.


25 posted on 09/10/2012 7:27:53 AM PDT by Buckeye McFrog
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To: Gaffer

It wasn’t ‘their’ debt. It belonged to privately-owned banks.


26 posted on 09/10/2012 7:33:26 AM PDT by agere_contra (Vote ABO. Don't choose the Greater Evil and then boast about how principled you are)
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To: shove_it

This reminds me of the rural problems we had in the bankruptcy during the 80’s, since rules were general, we had a lot of freedom to work things out and there was some abuse also. BUT WE GOT THROUGH IT QUICKLY.

The early ones that filed came out much better than the later ones. Maybe has some application here?


27 posted on 09/10/2012 7:40:16 AM PDT by PeterPrinciple ( (Lord, save me from some conservatives, they don't understand history any better than liberals.))
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To: Cronos
What they have done is admirable, but difficult to implement in bigger countries.

Remember the old Fram commercial, "You can pay me now, or you can pay me later."

28 posted on 09/10/2012 7:42:37 AM PDT by dfwgator (I'm voting for Ryan and that other guy.)
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To: proxy_user
There's a difference between making depositors whole (FDIC) than making bondholders whole (bailouts). Even if depositors aren't made completely whole, bondholders shouldn't get a cent until the depositors are paid back in full. This is (of course) the exact opposite of the model now unfolding in America, with the Sentinel ruling that banks, or at least brokerages, can pledge client deposits as collateral for their own bonds, whose holders will get paid back first before clients in event of bankruptcy. Let me guess: you agree with this ruling. I sure don't, and neither would Icelanders.
29 posted on 09/10/2012 7:47:55 AM PDT by coloradan (The US has become a banana republic, except without the bananas - or the republic.)
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To: Gaffer; All

Exactly how does one’s shirking of debt, outright denial and refusal to pay such constitute “impressive?.....

///
in Ireland, there was basically NO public debt.
NONE.
now, they are the most in debt nation in the world.
because their liberals passed a law,
making the common people liable for the bankers toxic debt.
-
in Iceland, the common people refused.
-
just as i hope our grandchildren, refuse to pay unsustainable pensions, promised on THEIR future bank accounts!


30 posted on 09/10/2012 7:52:00 AM PDT by Elendur (It is incumbent on every generation to pay its own debts as it goes. - Thomas Jefferson)
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To: shove_it

These economic crises can only be resolve by somebody taking the hit. Until then, all the legislating & negotiation & deficits do is re-arrange the problem with no movement toward a solution. It’s musical chairs: the music is about to stop, and there just aren’t enough chairs. Only when someone sucks up the loss (voluntary or not) will the others be able to recover and move on.

In our case, it’s that >$100T in unfunded liabilities be disowned outright (”sorry, can’t give you what someone else promised and never planned to deliver”), $16T in debt restructured (sell assets and give creditors options), and austerity spending cuts (”can’t spend what we don’t have”).

...but here it will only happen when the next generation realizes a lifetime of taxes will give them _nothing_ in return but forgiveness of the sins of their fathers.


31 posted on 09/10/2012 7:53:32 AM PDT by ctdonath2 ($1 meals: http://abuckaplate.blogspot.com)
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To: Elendur

Because Icelanders realize that in a true free market, companies that make bad decisions should pay for those bad decisions, instead of getting bailed out by the taxpayers. It’s called “risk” for a reason. Otherwise, you privatize profits, and socialize losses, the worst of both worlds.


32 posted on 09/10/2012 7:54:45 AM PDT by dfwgator (I'm voting for Ryan and that other guy.)
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To: Elendur

You have that right. Ireland did the opposite of Iceland when the banking crisis hit. Ireland was so addicted to being on good terms with the EU. Iceland was and is in a better export position so was willing to take a shot defying the EU honchos and banks


33 posted on 09/10/2012 8:47:47 AM PDT by dennisw (Government be yo mamma - Re-elect Barack Obama)
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To: shove_it; All

Discussion BUMP!


34 posted on 09/10/2012 9:01:02 AM PDT by PGalt
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