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[CyclopsRock]

Iceland's basically incomparable to the US and UK banks that got bailed out. They actually were too big to fail, the Icelandic ones weren't.

 

[Funky Papa]

Okay let's compare.

Data shows the US recovered after it bailed out big banks and did not jail bankers.

Yet only one of those countries managed to do so retaining its sovereignty and the dignity of the populace.

I'm perpetually in awe at how the most powerful country in the world seems so ridiculously defeatist when confronting successful measures enacted by smaller nations.

"We can't have a proper national healthcare service like the Nordics, their population is so small". "Sensible weapons regulations wouldn't work, there are too many firearms out there already". "We can't fight the banks, our economy couldn't take it".

Time to find that much vaunted bravery and use it for something better than pushing shitty trading deals and bombing impoverished villagers in Goatfuckingstan.

 

[Deleted member 231381]

But... Iceland didn't let the banks go bust? It just nationalized them? Other countries did that too - the United Kingdom and RBS, for example. Letting them go actually bust would have been dreadful for a whole bunch of reasons, but that doesn't mean you have to leave the same people in charge. Temporary nationalization and prosecution of key figures, on the other hand, does indeed work pretty great.

 

[Vicetrailia]

Iceland has balls that's for sure.

 

[Renekton]

Trapping capital has long term ramifications, investors will be leery for a good bit of time.

Malaysia did capital controls back in 1998 and we never fully recovered.

 

[Kill3r7]

You made an assertion that the US couldn't do it because it's a bigger country, you didn't explain why it's true.
Again, the fact that Iceland is tiny only made it harder for them to do it.

And I think the US should've totally went after bankers and thrown a whole lot of them to jail, not sure about putting them in receivership, but I would definitely broken them up like they did in Iceland.
But again, I'm not suggesting that you can take Icelandic solutions as is, the US and Iceland are different countries with different economies, but I am saying that this is further evidence that the "too big to fail" doom prophecies are mostly scare tactics made by people whose interests lay with the banks rather than the people.

I don't accept that there's nothing to learn from it because Iceland is a small country.

The lesson from Iceland is to be weary of big banks and improve banking regulations. However, if the major global banks were allowed to fail we would still be mired in an unprecedented global financial crisis. In 2008 we were not prepared to deal with such a crisis. We still aren't.

 

[Funky Papa]

But... Iceland didn't let the banks go bust? It just nationalized them? Other countries did that too - the United Kingdom and RBS, for example. Letting them go actually bust would have been dreadful for a whole bunch of reasons, but that doesn't mean you have to leave the same people in charge. Temporary nationalization and prosecution of key figures, on the other hand, does indeed work pretty great.

Yeah, I could be wrong, but AFAIK they only nationalize those banks like Sweden did when they faced their own crisis in the 90's. And they also came out stronger as a result.

 

[jimbor]

Interesting read here: http://brentpierce.com/2013/12/12/the-great-iceland-revolution-myth/

 

[Deleted member 231381]

Yeah, I could be wrong, but AFAIK they only nationalize those banks like Sweden did when they faced their own crisis in the 90's. And they also came out stronger as a result.

Yeah, but lots of countries did this; Iceland is not particularly exceptional in this regard. That's not letting banks go bust, that's explicitly stopping them going bust in return for partial or in some cases full state ownership. The only *really* different thing Iceland did was prosecution, and I don't think it's clear that prosecution aids recovery - prevents future collapses, maybe, aids recovery from current collapses, no. Obviously there are other reasons you should prosecute (a basic sense of justice being first and foremost), but this data is stretching to say the least.

EDIT: yeah, jimbor's article is bang on the money.

 

[Funky Papa]

Interesting read here: http://brentpierce.com/2013/12/12/the-great-iceland-revolution-myth/

There are many myths surrounding the Icelandic crisis, but what should I infer from an article dating from 2013 that puts their recovery in doubt now that we are firmly in 2015?

 

[alstein]

I think it's insinuated that the US would also have recovered if it did let the banks go bust. Because, as we all know, Landsbanki failing and Bank of America failing have the same effect.



I mean on the world stage.

In Iceland, they got so big that they were pretty much impossible to bail out. But internationally, they were still small banks.

Landbanksi had more impact on Finland than BOA would on the US.

I did an economic research paper on this years ago.

 

[Deleted member 231381]

There are many myths surrounding the Icelandic crisis, but what should I infer from an article dating from 2013 that puts their recovery in doubt now that we are firmly in 2015?

The thing in doubt isn't the economy, it's what exactly the "cure" was. Iceland didn't let their banks go bust, prosecution happened but only really affected two people in the end and is unlikely to actually have aided recovery, and the political situation returned to normal quite quickly.

The recovery is much more likely to be due to the fact that Iceland is a European country not on the Euro, so capital flight all went there. Same reason the UK is now posting stronger figures than the rest of Europe.

 

[Robot Pants]

Let's do it!

 

[jimbor]

There are many myths surrounding the Icelandic crisis, but what should I infer from an article dating from 2013 that puts their recovery in doubt now that we are firmly in 2015?

Infer what you like, you arrogant prick. I said it was an interesting read.

 

[Log4Girlz]

Infer what you like, you arrogant prick. I said it was an interesting read.

 

[kswiston]

I usually don't like writing off the policies of smaller countries when looking at a larger country like the US, but in this case we are talking about a country with the population of a medium sized city. It wouldn't even make the top 150 metro areas in the United States. Meaningful reforms are going to be easier at that scale.

 

[Coriolanus]

Temporary nationalization and prosecution of key figures, on the other hand, does indeed work pretty great.

Why?

 

[Funky Papa]

Infer what you like, you arrogant prick. I said it was an interesting read.

Calm your tits down, I wasn't even addressing you, but the article itself.

 

[trOOly]

If you read the news, you'll see how Iceland's economy was in a much worse state back in 2013, when that Brent Pierce piece was written, than this year. In 2014 they had a good recovery, though. The 4% inflation rate is slowly going to where it was before the crisis.

People should know that economic recovery is not easy, though, no matter how small or big the country is. While "letting the banks go bust" is in theory easier in a country with 300,000 people living in it, depending on how dependent on credit your economy is, purposely breaking the banking system is beyond belief. That's probably one of the reasons why the US and Europe didn't do it.

Another thing that shouldn't be overlooked: the devaluation of national currency for a export-based country like Iceland isn't exactly a bad thing. It stimulates exportation while it diminishes the incentive of importation. It is quite bad for the Eurozone as their purchase power diminishes heavily.

 

[CyclopsRock]

Why?

Because the government shouldn't be deciding which private enterprises deserve tax payers money?

 

[Bigboss242]

The united states hasn't really recovered the bankers are still out of control. The bastards are looting the damned country jail them.

 

[terrisus]

"Data show," not "Data shows"

 

[Coriolanus]

Because the government shouldn't be deciding which private enterprises deserve tax payers money?

They stop being private enterprises once they become nationalized, mate.

And of course it should. It decides it all the time. It generally does so through a licitation process.

 

[CyclopsRock]

They stop being private enterprises once they become nationalized, mate.

And of course it should. It decides it all the time. It generally does so through a licitation process.

I wasn't talking about the banks, mate. Their role is to lend people and businesses money - so they can buy houses and cars and make capital expenditures and invest and whatever whatever whatever. Right now, banks use a relatively complicated set of metrics to work out who to lend to, how much to lend them and at what interest rate.

It's this money that I was talking about, which is now all capital owned by the taxpayer but is lent out to private individuals and businesses. When a bank is owned by the government, upon what metrics does it make this decision? In the UK we have a "Green Investment Bank" - a bank wholly owned by the government to encourage the growth of green industires (the implication being that they're either too risky for commercial banks to lend to, that the requisite interest rate is too high for their ventures to be successful or their rate of return too slow), the understanding being that they have interests beyond purely making money. They want to encourage high-skill green jobs, help the UK lead in this growth industry etc etc. That's all fine and good, because it's pretty niche, though it basically ammounts to a form of government subsidy.

But Lloyds, RBS, HBOS? These were - are - enormous banks, with enormous balance sheets and enormous capital. The idea of the government picking and choosing to whom they wish to deploy these things borders dangerously close to central planning for my liking. Are they there to make money? Are they there to nudge the economy in a certain route? To enact significant policy directives (ie cutting carbon output not by internalising the costs, but rather by strangling such businesses in the cradle)? If the government want to achieve certain outcomes, they should do it via legislation, not via the back door in the form of manipulating the distribution of private capital. If it's a temporary thing, these ... temptations don't exist - the business needs to remain profitable so they can sell it on again when the economy picks up.

 

[Coriolanus]

But Lloyds, RBS, HBOS? These were - are - enormous banks, with enormous balance sheets and enormous capital. The idea of the government picking and choosing to whom they wish to deploy these things borders dangerously close to central planning for my liking. Are they there to make money? Are they there to nudge the economy in a certain route? To enact significant policy directives (ie cutting carbon output not by internalising the costs, but rather by strangling such businesses in the cradle)? If the government want to achieve certain outcomes, they should do it via legislation, not via the back door in the form of manipulating the distribution of private capital. If it's a temporary thing, these ... temptations don't exist - the business needs to remain profitable so they can sell it on again when the economy picks up.

You're assuming that the legislative wouldn't be as, for lack of a better term, dangerous, as the executive. Why?

Can't quite see the difference between doing such a thing in your scenario via taxation privileges or via more lenient terms through public banking, tbh.

 

[CyclopsRock]

You're assuming that the legislative wouldn't be as, for lack of a better term, dangerous, as the executive. Why?

Can't quite see the difference between doing such a thing in your scenario via taxation privileges or via more lenient terms through public banking, tbh.

Well, I live in a country where there is no distinction between the two most of the time - coalitions are the only time when there's any meaningful difference, and they're rare - so it's not that I think the legislature is inherently less dangerous, but there is at least public debate, a record of legislation and open opposition. Leaving it up to, I dunno, this magical new Minister for Banking leads it open to basically anything - we, as a country, elect our legislature. We don't elect Dave Smith to be the minister for Banking.

But that's not really the answer. The actual answer is that I don't think governments should have a monopoly on capital to enact their desires. I don't think it should be a tool at their disposal - neither the legislature nor the executive, but you can run a bank via a legislative chamber so it precludes that option anyway. I presume you don't need me to go into detail about why I don't think this should be a tool at the disposal of the government.

 

[entremet]

Incentives, incentives, incentives.

Jailing was never gonna happen, but we did repeal laws that perverted the incentives that led to this mess.

The fact that we didn't enact those laws again is more telling.

 

[Fuchsdh]

I think it's insinuated that the US would also have recovered if it did let the banks go bust. Because, as we all know, Landsbanki failing and Bank of America failing have the same effect.



I mean on the world stage.

In Iceland, they got so big that they were pretty much impossible to bail out. But internationally, they were still small banks.

Well, Bank of America failing wasn't actually a serious concern, although if other banks had been allowed to fail who knows if it would have started a domino effect.

I do agree that the situations aren't broadly comparable, although I certainly do agree that prison time should be on the table for corporate executives and the fact that few people actually went away for the housing crisis is a missed opportunity for justice and for helping to set an example for the financial industry. A little fear of god is a good thing.

 

[Trojita]

Infer what you like, you arrogant prick. I said it was an interesting read.

 

[Deleted member 231381]

Why?

It doesn't have to be, I'm just saying it has worked well in the past. Nationalized vs. privatized banks is a whole different conversation to begin with.

 

[Foffy]

We should have put the people behind the crash behind bars for the rest of their lives IMO.

Perhaps we should have. Not punishing those who created a social mess gives the idea that what they did wasn't too bad, and creates the possibility of repeated uh ohs. It has given rise to the idea that the 1% are above law and order in this country, for sure.

Yet only one of those countries managed to do so retaining its sovereignty and the dignity of the populace.

I'm perpetually in awe at how the most powerful country in the world seems so ridiculously defeatist when confronting successful measures enacted by smaller nations.

"We can't have a proper national healthcare service like the Nordics, our population is so small". "Sensible weapons regulations wouldn't work, there are too many firearms out there already". "We can't fight the banks, our economy couldn't take it".

Time to find that much vaunted bravery and use it for something better than pushing shitty trading deals and bombing impoverished villagers in Goatfuckingstan.

Add an assured income to that mix. People think we're too big of a nation to actually deal with poverty and the eventual automation tsunami we're creating by offering a safety net of money in a system that says money rules it.

We seem like a nation that, quite literally, would rather have its populous suffer under shitbrained ideas than actually assess and address the bugbears. Instead, we settle for patchwork that is only addressing sores of the problems we face, but not the problems themselves. It will be that "too big to do X" mentality that will eventually allow the rest of the world to usurp this nation.