I don't want to emulate Iceland
Last edited Fri May 29, 2015, 03:48 AM - Edit history (1)
1/10th of the population is in personal loan default (it's 4% in the US).
The home repossession rate is higher than in the US (though thankfully their excellent safety net makes that less problematic for the evictee).
The green/left coalition government that "defaulted" (that's a gross simplification of their actions) on the international debt was just chased out of Rekyavik by a center/right coalition.
Their public pension benefits were cut (thankfully not as much as the IMF wanted).
(EDIT: Sorry, I was reading the "Ireland" line on the table... Iceland's unemployment rate is lower than ours.)
Iceland's tax system is more regressive than the US's (there's a 24% national sales tax -- but only 11% on groceries! yay!).
Iceland's corporate tax rate is almost the lowest in the industrialized world (20%, vs. our 34%)
No real-life economic or political problem is simple enough to be meaningfully reduced to a meme.
= new reply since forum marked as read
so it's hardly an apples-and-apples comparison. The most recent figures for Iceland's unemployment rate? 4.4%. The USA? 5.4%. (And what is the USA's unemployment rate? U6 unemployment - those who are out of work, those who have given up looking for work because of discouragement, and those who want to work full-time but can only find part-time employment, is 10.8% of the USA's labour force.)
The USA is currently in deflation, not inflation (the inflation rate is negative); this is in part because of what's been going on with the price of oil and the fact that oil is traded in dollars. Deflation is worse than inflation, economically (see: Japan's "lost decade"
; Iceland's inflation rate is 1.6% (and "optimum" inflation rates are generally agreed to be around 2%).
Iceland'c corporate tax rate is actually fairly average for industrialised countries; the corporate tax rate in the UK, Russia, and Finland is also 20%; it's 22% in Sweden, 25% in Austria, Denmark, the Netherlands, Portugal, Spain, and Switzerland. The USA has the second-highest corporation tax in the developed world, which discourages international investment.
Before the crash, it went through massive deregulation and the banks outweighed the rest of the economy by a huge amount. Many people took out mortgages denominated in euros, which caused huge problems when the currency plunged.
From the IMF's Dec 2008 summary:
Kaupthing, and Landsbanki). In 2004, these banks began a period of expansion, with
consolidated assets of the banks expanding from 100 percent of Icelandic GDP in 2004 to
almost 900 percent at end-2007. By end-2007, over 50 percent of the banks’ assets were held
abroad in branches and subsidiaries, principally in the Nordic countries and the U.K. This
expansion was funded in global wholesale markets, allowing banks to overcome domestic
resource constraints but doubling their foreign debt. This dependence on wholesale market
funding became a source of concern at the onset of the global turbulence in mid-2007, and
caused banks’ counterparty risk, as evidenced by CDS spreads, to increase sharply.
...
In recent years, corporate balance sheets
expanded through debt issues, largely financing
acquisitions abroad by Icelandic companies. As a result,
leverage of companies increased substantially. Debt of
nonfinancial corporations exceeded 300 percent of GDP
in 2007. Domestic banks financed about two-thirds of such
debt, 70 percent of which in foreign currency. While
mostly financing foreign investments, a growing share of
foreign currency denominated debt is owed by companies with no overseas operations.
...
Household debt increased sharply in recent years. Household debt, predominantly
in mortgages, reached 103 percent of GDP by 2007 (about 220 percent of disposable
income), higher than other European countries and the United States. Some 80 percent of
household debt is indexed and another 13 percent is denominated in foreign currencies.
However, the high level of owner-occupied housing (90 percent) and relatively modest
loan-to-value ratios partially mitigates such concerns. Moreover, the net asset position of
households has strengthened in recent years.
...
http://www.imf.org/external/pubs/ft/scr/2008/cr08368.pdf
The situation they're in is still mainly determined by that hyper-capitalistic binge before the crash. They let the banks fail, in a way that no other country seems to have dared to, and I think they've done better that Ireland, which had a similar bank problem which its government decided to make the taxpayers bail out. But because of the size of the countries, it's hard to see how the USA could have got into a comparable hole.
Krugman posted a comparison with Latvia:
http://krugman.blogs.nytimes.com/2015/05/28/latvia-the-thrill-is-gone/?_r=0
Latvia was in the ERM II mechanism - keeping its currency in a small band compared to the Euro - until Jan 2014, when it joined it. It also went for austerity in a big way. The loss in GDP (measured, I think, in their own currency) was about twice as much at the worst, and they still haven't recovered.
