Krugman Blog- Iceland Leads The Way Out

[n2doc]

September 1, 2011, 9:01 AM
Iceland Exits


Iceland is no longer under an IMF program; here’s the IMF report (pdf) pronouncing the adjustment program successful. Indeed. Iceland still has high unemployment and is a long way from a full recovery; but it’s no longer in crisis, it has regained access to international capital markets, and has done all that with its society intact.

And it has done all that with very heterodox policies — debt repudiation, capital controls, and currency depreciation. It was as close as you can get to the polar opposite of the gold standard. And it has worked.

http://krugman.blogs.nytimes.com/2011/09/01/iceland-exits/

[Hawkowl]

1. Greece should take note

This is the only way out for the entire western world. The banks need to be shut down and the system reset. The wealthy bondholders are going to have to take sever haircuts. Eventually, (sooner rather than later) Greece is going to have to default. They are paying over 40% on their Treasury bills to finance their debt!!! The eurozone is in for a huge reset.

[dkf]

2. Then they have to cut ties with the Euro zone and go at it alone.

Their people will have to make do without outside help.

[Hawkowl]

3. It worked for Iceland

They'll have to forgo more DEBT i.e; IMF and Euro debt. The point is they are broke and the only way out is to declare bankruptcy and start over. Otherwise, they are condemned to perpetual austerity, which is politically untenable. Europe is very, very sensitive to mass demonstrations and political unrest. Unlike the US, the Europeans still have the horrors of war in their backyards in living memory.

Iceland did it and it is working out well for them. Sweden took a similar route in the 1990's and it worked well for them. The problems of Greece, the Eurozone, and the US isn't an economic one, it is a political one. The will of the majority of the people has to supersede the will of the 1% of the super wealthy banksters that are fucking up the world's economy.

[muriel_volestrangler]

8. Iceland was never in the Euro; and its banks weren't the problem

Greece's problem was continued government deficits. Really, there's not much lesson to be transferred from Iceland to Greece. Getting out of the Euro is something that no country has done; if it looks likely, there will be huge runs on Greek banks as those with money try to avoid getting stuck with what will become 'new drachmas' or whatever. It would have to be done in cooperation with the other Euro countries; Iceland could act on its own.

Sweden in the 1990s was different from Greece, again; it nationalised its problem banks. Again, it did not have a huge government deficit.

n2doc mentions Argentina; that is a more appropriate model for Greece. Argentina untied its currency from the dollar, underwent a few years of massive austerity due to devaluation and huge unemployment, and eventually got back on an even keel. Whether the Greeks are ready to go for that 'short, sharp shock' method, rather than the drawn out but less severe version they face now, I don't know. If they don't do it in cooperation with the rest of the Eurozone, the EU might expel them; and that would cause Greece a load of other problems.

[Enthusiast]

12. This is the only solution to what ails us.

"The will of the majority of the people has to supersede the will of the 1% of the super wealthy banksters that are fucking up the world's economy."

[n2doc]

4. Help always is available.

Argentina also went this route. lots of predictions of disaster, no one will do biz with them, etc., etc. Soon enough the banksters, IMF, etc just can't help themselves and work with the country again. There were dire predictions about Iceland, these seem to have failed completely.

I'd love to see Ireland follow suit.

[villager]

5. Ireland, Spain, and then, in terms of actual change we can believe in... us!

n/t

[Cool Logic]

6. Krugman also claims that a Cat 5 hurricane brushing along the entire eastern seaboard...,

a 9.8 earthquake centered in Washington D.C. and invasion of earth by extremely hostile extraterrestrials, are the trifecta of utopian events needed to get the economy going again.

Krugman is a believer in the "Broken Windows" school of economics. Apparently he missed the part of Econ 101 where they teach you it's a fallacy.

[Raster]

7. I'll take Krugman any day. His track record is far better than your glib assessment.

[closeupready]

9. Krugman has a Nobel under his belt. Do you?

??

[Cool Logic]

15. So does Milton Friedman...

And your point would be...?

[closeupready]

20. But you're not Milton Friedman, are you?

nt

[muriel_volestrangler]

10. Where does he claim this? (nt)

[hifiguy]

11. ...

:rofl: When you have a chair at Princeton and a Nobel then I might think of starting to take you seriously.

[Enthusiast]

13. Thank you for sharing

the right wing talking points. We just don't hear enough of it on the M$M.

[Cool Logic]

16. Ah yes, sharing..

"I think frankly it’s got to be — business investment is not going to be the driving force in this recovery. It has to come from things like housing…. Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don’t know." ~ Paul Krugman, 2001

Mr. Krugman was not the only one who failed to recognize the looming crisis in the housing sector, but he was the only one I know of that advocated creating a housing bubble to replace the Nasdaq bubble.

[Enthusiast]

18. I do not think Krugman anticipated

predatory lending on the scale we had during Bush. I also don't think he anticipated the securitization, the corrupt ratings agencies and bundling of toxic assets on the scale that went on. Who could have imagined fraud on such a scale?

So, you don't like Krugman. Reveal your favorite economist. You know, the ones responsible for the shit we are in, the advocates of wild west finance.

[muriel_volestrangler]

21. The point is you are repeating RW talking points that even they have had the grace to retract

http://www.slate.com/blogs/weigel/2011/08/24/the_krugman_google_saga_or_why_fact_checking_is_important.html

You don't care what he actually said, or that he doesn't believe 'broken windows' are a good thing; you just want a way to attack him, whether or not it's got anything to do with the truth.

[JHB]

14. In one word: bull

But kudos for so spectacularly missing the point.

[Cool Logic]

17. I get the point; however, I do not believe that a nation can just bury its head in the sand...

and forget about its debt.

[Enthusiast]

19. Yeah, right in the middle of

a depression like downturn you advocate correcting the debt problem. That will pump up the economy.

And you are critical of Krugman? Dude.