Iceland did it right

[Eddie Haskell]

http://www.washingtonsblog.com/2012/08/top-economists-iceland-did-it-right-everyone-else-is-doing-it-wrong.html

Help the needy, not the greedy.

[On the Road]

1. Iceland Did it Right for Themselves,

but there is a reason that Krugman did not recommend this course for the US:

For the most part, Iceland’s lesson is relevant to countries that experienced big capital inflows followed by a sudden stop — that is, the European periphery, not the US or the UK.

What Iceland did allowed their own economy to avoid the worst of the recession, but with several caveats:

1) Unlike Greece and the other PIIGS, they had an independent currency which could be devalued. This was just as critical a part of their plan as repudiating the debt.

2) Unlike larger countries, the losses went predominantly overseas, meaning that to some extent they exported their problems. Otherwise, allowing banks to fail would have taken down business payroll accounts as well, and employees of those would have stopped receiving paychecks. That would have cause a crash worse than anything seen in the Europe or US.

3) This policy that can only be counted on once. Iceland can no longer rely on external financing.

4) They jury is still out -- almost literally -- on whether Iceland has permanently escaped the burden of its banks' foreign obligations. The EFTA has outstanding cases such as the one against Icebank that appear to reimpose some burdens on the Icelandic financial industry.

Krugman is not proposing that the entire financial industry of a country be allowed to collapse. Rather:

What it demonstrated was the usefulness of devaluation (and therefore of having your own currency), and the case for temporary capital controls in an emergency. Also the case for letting creditors of private banks gone wild eat the losses.

[jtuck004]

2. This sounds like a list of excuses to keep thieves in place.

Unlike noted above, the banks started their little crime spree HUGE amounts of private capital, where they threw the underwriting standards out the window. And we DO have our own currency.

The big lie in all this is that the people who would have hurt the most were people like Mi$$ Rmoney, whose personal fortunes would have toppled in the wake of a cleanup, and those who are living on pure debt. Yes, millions of Texans would have lost their retirement accounts in the failure of AIG. But has anyone noticed, THEY ARE LOSING THEM TODAY, spending down assets now, in tribute to our banks and other phony debt instead of addressing the fraud. The politicians are making decisions that leave people with the most money in the best position, many of whom donate (surprisingly small) amounts to their campaigns. And that is nothing more than facilitating whose CRIMINAL behavior.

Of course the banks would have collapsed. Had Jesse James been caught, he would have gone to jail. Typically when we stop criminals in the act, they have to stop what they are doing. With any luck thousands of formerly insulated people would have gone to jail, where there partners could be making money from their incarceration. (There would have been some irony for us).

Would we have had to quit living on debt, with a huge shock, and a lot of lives disrupted? Sure. Look at what the civil war did to the South. But the people who would lose the most are the wealthy who began this fraud in the first place. When slaves were freed in the South, a few turned around and went back to the plantation, and it took years for them to figure out a new life, and some never did.

On the other hand our government decided the plantation was a fine place for people to work, and that's where most of us are today, in a society STILL floating trillions of dollars in illegal debt based on phony housing evaluations. That's why there are over 10 million housing units still underwater, many of which will never, ever be paid. And we are trying to run the most powerful nation on earth by increasing the number of coffee servers and home health aides. That's what happens when a country sells it soul to Jamie Dimon.

The ONLY reason to continue to seek further financing is to keep the wealthy in their place. If we got rid of all the illegally created debt, we would not have as much need for "external financing". Would it be a massive shock. You bet. But it's better than being owned.

It's called being a grown up. But the politicians figured the American people were gullible enough, fat enough, they they would accept the lies to keep from having to lose their too expensive houses and over-powerful cars. So they trade the continuance of fraudulently and irresponsibly placed debt for a stronger country.

On the other hand, most people think slavery in 1865 was a bad thing. Today, with debt slavery cutting across all skin colors, seems all people can do is make excuses as to why people should be serfs.

Americans deserve EXACTLY the life they have let others rope them into, and will be living it at least the next 20-30 years, maybe longer.

Not enough excuses to excuse that.

[mbperrin]

3. Well said. Gamblers and speculators always TALK about risk, but when

it comes time to shoulder it, they run away.

Crooks should be in jail; crooked institutions should be dead.

And a good social safety net to catch the innocent from being killed by the falling crooks.

[jtuck004]

4. Falling crooked bankers and their arms, eyes, legs. I would pay to see that hurricane. (edit, lol)

Last edited Sat Aug 25, 2012, 06:10 PM - Edit history (1)

Obviously would have to, as we de-leverage their ill-gotten gain. But I would.

Upon further reflection I realized how that subject sounded I meant it in the spirit of La Boetie

"The tyrant, indeed, has nothing more than the power that you confer upon him to destroy you. Where has he acquired enough eyes to spy upon you, if you do not provide them yourselves? How can he have so many arms to beat you with, if he does not borrow them from you? The feet that trample down your cities, where does he get them if they are not your own? How does he have any power over you except through you? How would he dare assail you if he had not cooperation from you?"


Not literally.

[Eddie Haskell]

6. Wow!

I posted a response before reading yours. You had all my points covered.

[On the Road]

7. If You Really Want the Rationale,

just keep reading Krugman. He is not on your side on this one, and says so pretty directly in the article. Diatribe is neither policy nor economics.

Now, if you had said that the bondholders should take a haircut, that the stock should lose its value, or that failing banks should go into receivership, I would have agreed with you. I would agreed if you said that the banks had too much influence in legislation or policymaking. Instead, you said the banks to be allowed to fail.

As it turned out, the bridge loans made to Bank of America, Chase, Citi and Wells Fargo were all enormously beneficial to the taxpayers and the general public. If one of the big four had gone under, none of its commercial accountholders could have written paychecks, paid suppliers, or paid taxes. Try hard to think of the implications of that without getting whipped up into a frenzy about the wealthy. It might seem worth it to you to ruin everyone's lives for a sense of justice and schadenfreude regarding the rich. I can assure you that you are in the minority. I'm very glad our president doesn't feel the same way -- nor does any Democratic party leader, including the most liberal.

And if you reread your comment, it's difficult to tell if that was written by someone from the right wing or the left wing. That should give you pause.

[mbperrin]

8. I haven't banked since 1978, and my school district doesn't borrow money to make payroll, so

no problems for me.

Actually, anyone who is actually borrowing to make payroll is out of business already - they're just flailing. That's a short-term obligation every week, two weeks, month, whatever the period, and needs to be met with current cash flow. Borrowing to pay taxes? Borrowing to pay suppliers? Whoa.

Well, like I said, I've bought rental property, cars, houses, all the necessities and pleasures of life without needing a bank account, a loan, or any other banking service in 34 years. Bet I have literally saved a million dollars.

"ruin everyone's lives"? Surely you would agree that's hyperbole at least.

[jtuck004]

9. Remember those chains Joe Biden was talking about, y'all?

Joe (I take liberties) was being kind:

Based on Wolff (2010), the bottom 40% of the population combined has only 0.3% of wealth while the top 20% possesses 84% (see Figure 2).

Here.

From above >>"It might seem worth it to you to ruin everyone's lives for a sense of... "

Been outside lately? Why ignore the millions of our neighbors whose lives have already been ruined? They are all around us, more every day. Not the wealthy bankers though, nor the Mi$$ Rmoney class.

"Only 56% of Americans laid off from January 2009 through December 2011 had found jobs by the start of this year, the Labor Department said Friday. More than half of them took jobs with lower pay. One-third took pay cuts of 20% or more." Here. And we added an additional 6 million people to our population in that time.

That means hundreds of thousands of people who were in their late 40;s or early 50's when they were laid off in 2009 worked the last job they ever will. (Unless the imaginary Jobs Fairy (the one who creates good jobs without massive investment) beats up on the imaginary Apocalypse fairy). Then all bets are off.

I realize I am discounting the imaginary "Apocalypse Fairy" (who brings doom if you disrupt the financial sectors ongoing fraud). That point of view is often touted as a reason for inaction by those who think it is important to support the privileged for the good of everyone else. The privileged themselves, and their appeasers, seem especially fond of this reasoning.

But my country, because we worked together and invested in ourselves, we flew a spaceship 354 million miles and dropped a nuclear-powered space rover the size of a mini-cooper softly onto the surface of Mars, and commanded it to transmit vacation pics. And everyone cheered! We gave the world the Internet, Budweiser, and Nixon...ok, so not everything works out for everyone. But we try.

The writing above attempts to persuade me that this country is so weak we HAVE to let people commit an ongoing fraud because we just CAN'T deal with the implosion? Ok, maybe some elected officials in Lubbock might have a problem, but I have faith in the rest of us. We've done hard things that were no sure thing, people were called to service and they took care of business (WWII and the moon come to mind. We weren't saints, but we got the job done.). I will never be convinced otherwise, I don't care how many lackeys with mortgages or political offices to protect are trotted out to spout their particular brand of BS. Heck, hire Paul Krugman. If he knows so much he should be able to oversee our continuity while we search for people with morals. Then again, a man (or woman) has to know his/her limitations, eh?

Who would REALLY be hurt? The guy whose car is broke down 26 out of every 30 days? The woman who takes the bus to a full-time job that doesn't pay enough to keep her and her kid off of food stamps? They already know deprivation, intimately. More than half already know how and where to pick up government assistance, according to the Census Bureau, if that is what it comes down to. Especially if they are elderly and retired in this country. The baby boomers have been dealing with a declining job market for years - . those companies the vulture capitalists closed have just been heaping people on us whose jobs disappear every few years, sometimes less.

The bankers and the Mi$$ Rmoney class, and their friends? Mmm, oh, they would take it in the shorts. The thing they have lived for evaporates. Without that insulation they must live with the rest of us. Now I think I know who most strongly views this turn as Apocalyptic. They do control about 25 million jobs, as I recall, but when you work for the tyrant that pees on the peasants, you might expect some fallout. On the other hand, is planning your life around a career at Staples ones best move?

(Wonder what would happen if Rmoney heard the announcement "For food, report to your public shelter". Do you think he would scream in frustration, knowing that he knows about nothing outside of his plundering of other people's lives, and sure as shit doesn't know where ANY PUBLIC building is? Not even a butler to ask directions of. :roflshipmp:

Would payrolls and food and utilities all be affected? Probably. Would it be an insurmountable problem for a country with a fiat currency. Hate to belabor the obvious, but that's WHY we have a fiat currency, so we can manage our economy better.

The upside is that on the other side of the turmoil we would be stronger, the debt that followed us as the weight on the end of our chains would drop off. The right people would be in jails made of concrete and steel, instead of broken families in jails called rentals covered with lead paint and located in bullet-riddled neighborhoods full of empty buildings. We might have real health care solutions that don't enrich insurance companies, and a couple hundred million people could live with a LOT less income as well, or perhaps better, than many do today, college could train the people we desperately need to be doing research on our future today, at a much cheaper cost.

We might even figure out how people can thrive in an an economy without selling all the crap we used to sell overseas, or overbuilding our country. 'Cause those days are, how do you say it? History.

On the other hand, keeping things as they are and supporting the banks positively insures that taxpayers and employees, even people in prisons stay little more than providers of fees the wealthy pocket, on every transaction they can securitize, whether it be parking meters, turnpikes, student loans, credit cards, homes, autos, water service, credit cards, invisible stuff (still not disclosed), checking accounts, war, groceries and Koch Brothers paper towels, municipal infrastructure...the list goes on. It insures that their debt continues to drag on the country for decades, and may still yet lead to a bottom we can't be ready for. And when the fee-payers are used up, the resources that used to sustain them will have been absorbed, so they can just be discarded.

We cannot do better in this environment, because others are pocketing the opportunity. It's like seeing random electrical activity on a heart that is in full arrest and assuming it's always good news. What one should realize is that the patient might come back or may not, but they are unconscious and in real peril. That's this country right now. Even if we place all the laid off folks into the fastest growing occupations, home health aid and working in the hotel service staff of the tourism industry, do you really think that's going to bring us a more prosperous future? Wanna bet other countries are training research scientists without making sure they are broke when schools over/

I (and maybe Joe Biden?) can't help but see the parallels with another more easily identified form of bondage, that of slavery. There are still those who argue slaves were been better off to stay on the plantation, regardless of how horrific the injury to their spirit and worth. In 1865 it might have been plantation owners and supporters of slavery, both groups having anything but the best interests of the oppressed in mind. (Read the comments on the Field Negro Blog, it's enlightening). Heck, there are important people in political parties who have uttered similar words in our public media over the past few years, you betcha. I don't have to pause to know what party most of them would ally with.

Going back even further, I suspect folks at the time heard the same crap from the English when the American colonies broke away from their "protection". Given those histories, it doesn't surprise me that people would argue for our current status quo, keeping the taxpayer bound as a serf via debt, debt they are likely going to be prevented from ever paying in full, becoming just a source of continuing revenue with no chance of building wealth-producing assets that they control. (Assets they can't control, btw, are the ONLY things that scare people with wealth and privilege, They can buy most everything else, including protection).

From above: >> "As it turned out, the bridge loans made to Bank of America, Chase, Citi and Wells Fargo were all enormously beneficial ..."

That is absolutely true and verifiable, as far as those banks and their associates go. Years of fraud rewarded by taxpayer dollars and insulated from legal action. The continued funding of their bank accounts, cars, multiple homes. While they pay lower taxes because the are so important. As our candidates affirmed, "business" is good.

but >> "... beneficial to the taxpayers and the general public"

That completely ignores and disrespects the lives that have been shattered and the pain millions of people are living with every day. People living in misery while the perpetrators of a fraud are rewarded.

It's not beneficial for the kids that leave school Friday knowing they may not see another meal 'till they get back to school Monday. Nor for the ~50 million people without health care, those on food stamps that JP Morgan profits from, the millions of people who have already been thrown from their homes or the 10 to 15 million that are STILL underwater or troubled, or the near 30 million people that would go to work tomorrow if there were jobs, (which the labor department statistics and historical info suggest may well be another 10 years or more away, at least).

But just so one doesn't have to pause, my side is the one right next to those removing support for the tyrant. Because we will all be better when the tyrants fall.

[Eddie Haskell]

10. Who would REALLY be hurt?

Careful, they might turn off the trickle down spigot.

[Eddie Haskell]

5. Very interesting ...

But these traders have a code and I say make them live (or die) by it. If the US goes down, so be it. We'll never pay this debt off anyway and we'll be paying the interest for generations. We're screwed either way. I'd rather be free and poor, than have my grandchildren enslaved by someone else's debt.

I may be naive, but I think it's just as naive to think we're going to be able to keep this Ponzi scheme going forever.

[jtuck004]

11. Iceland rocks. No, I mean real rocks. Their elected officials said "austerity" and

"support the banks", help the greedy.

The citizens got arrested for throwing rocks at them as a response, and the government changed it's mind. They could teach us a thing or two about not being in chains, I think.