How did Iceland recover? Report from Davos

In this three-minute interview, Iceland’s President Olafur Ragnar Grimson explains that their recovery from the economic crisis was based on actions that went against the orthodox prescriptions–Let the banks fail, introduce currency controls, provide support for the poor, don’t push austerity measures. Why are banks the “holy churches of the economy?”

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8 responses to “How did Iceland recover? Report from Davos

  1. Pingback: Documentary on Iceland’s Rise From The Economic Crisis | THE SCARECROW

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  3. Pingback: How did Iceland recover? Report from Davos | Beyond Money | Discover Your Wealth

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  5. and there is another opinion on this theme, now less fuzzy and exciting

    “What is actually going on in Iceland” http://bit.ly/VuS6Kq quote “Since people continue to spread the factually dubious statement that Iceland “told creditors & IMF to go jump, nationalised banks, arrested the fraudsters, gave debt relief and is now growing very strongly, thanks” I find I have to write this here thing. … Because, for some reason, people won’t believe Icelanders when they say that the above is not quite the reality as most Icelanders experience it.”

  6. Pertinent to this interview and the Iceland case, this came to me today from one of my correspondents. It helps to fill out the picture of what actually happened–t.h.g.

    Iceland’s Lessons on How to Fix a Bank Crisis
    naked capitalism – Posted by Lambert Strether

    By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness (http://www.macrobusiness.com.au/2013/01/icelands-lessons-on-how-to-fix-a-bank-crisis/).

    I’m slowly working my way through the material that’s coming out of World Economic Forum in Davos. I tend not to take too much attention of what is said at this particular conference as, in my opinion, it tends to be full of self-serving tripe in the most part.
    I did, however, notice a small interview with Icelandic President, Olafur Ragnar Grimsson, which was quite interesting.
    There are two reasons why this is such an interesting interview.
    Firstly, Mr Grimsson raises some very good points about the effect a large financial services industry on the rest of the economy. He also asks the important question as to why exactly a private bank should be treated differently from any other private enterprise even if has some strategic importance and why exactly national citizens should suffer due to poor business practices. In that regard, Iceland, much like Sweden , has become a model of what should be done after a banking crisis. In short, the aim of the game is to save the banks, but not the bankers.

    There is, however, one small problem with Mr Grimsson’s points. He appears to be doing some fairly large historical revisionism in the account of what actually happened. The Icelandic government was not ‘wise’ in it’s implementation of a non-orthodox approach at all. It actually attempted to keep some of the banking system alive, including giving them money along with ‘un-lawful’ loans and part of the IMF program that came later was used save a number of building societies.

    It is correct to state that Iceland didn’t bail out its three large banks that collapsed in October 2008, but this was simply because at 900% of GDP it was absolutely impossible. The Government did initially attempt to save Glitnir , but it became apparent very quickly that the central bank did not have the foreign reserves available to keep the banking system alive.

    In the end Iceland did become a lesson for the rest of the world in how to best manage the crisis, but the initial response certainly wasn’t planned and certainly wasn’t due to the wisdom of the government. If you are interested in reading some future information I recommend you start here (http://icelandicecon.blogspot.fr/2013/01/the-economic-truth-on-iceland.html) and here (http://uti.is/2011/11/iceland-successful-recovery-and-the-non-bail-out-banking-myth/).Tuesday, January 29, 2013

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