Creating a new thread to avoid going off topic here:
Yes I have moved to Iceland, but not because Argentina is no longer a good example of the benefits of default. The main reasons for focusing on Iceland now is because it is a more recent example, stems from the same global crisis, and was precisely used by politicians and the media to demonstrate how not to do it.
You are not correct on Iceland still being locked out of the money markets. Iceland is auctioning bonds off on the open market and the 10 year yield is just over 6%. They will probably face many law suits about outstanding debt, but it is not the taxpayer that will be held accountable (they very clearly said so in their referendum).
The currency devaluation is probably the worst thing that Iceland did during the crisis. It is a general economic misconception that currency devaluation is some magic trick to ensure a return to growth. The negative effects on import prices negates any benefit on gains in export prices, especially in small countries with heavy dependence on imported goods.
Could you elaborate a bit further on this: "Impossible to achieve in a normal banking system". I'm not sure how you came to this conclusion and what you define as a normal banking system.
Bottom line is that Iceland is in a far better position now than Ireland is, because the pain was not postponed.
And just to clarify something, I am not saying that default or allowing banks to fail is an easy option with little or no disruptions. What I am saying is that it is the only solution that will ensure the fasted way back to recovery, while at the same time not burdening the taxpayer with guarantees and not creating a insurmountable moral hazard. There simply is no pain free solution for countries like Ireland and Iceland.
Chris said:
Yes I have moved to Iceland, but not because Argentina is no longer a good example of the benefits of default. The main reasons for focusing on Iceland now is because it is a more recent example, stems from the same global crisis, and was precisely used by politicians and the media to demonstrate how not to do it.
You are not correct on Iceland still being locked out of the money markets. Iceland is auctioning bonds off on the open market and the 10 year yield is just over 6%. They will probably face many law suits about outstanding debt, but it is not the taxpayer that will be held accountable (they very clearly said so in their referendum).
The currency devaluation is probably the worst thing that Iceland did during the crisis. It is a general economic misconception that currency devaluation is some magic trick to ensure a return to growth. The negative effects on import prices negates any benefit on gains in export prices, especially in small countries with heavy dependence on imported goods.
Could you elaborate a bit further on this: "Impossible to achieve in a normal banking system". I'm not sure how you came to this conclusion and what you define as a normal banking system.
Bottom line is that Iceland is in a far better position now than Ireland is, because the pain was not postponed.
And just to clarify something, I am not saying that default or allowing banks to fail is an easy option with little or no disruptions. What I am saying is that it is the only solution that will ensure the fasted way back to recovery, while at the same time not burdening the taxpayer with guarantees and not creating a insurmountable moral hazard. There simply is no pain free solution for countries like Ireland and Iceland.