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Iceland Stays Cool in Financial Crisis
The latest job creation numbers in the US are nothing to write home about…
Only 135,000 jobs were created last month, less than the 150,000 that some economists expected…
And that means, of course, that the economy is still moving in the wrong direction. This is after three years of stimulus spending, shovel ready jobs, expanding government hiring, and how many new jobs programs out of Washington D.C.
So what’s gone wrong?
Well, we are told by the administration that “things were worse than we thought they were,” or, from the likes of Paul Krugman, “we haven’t spent enough money to stimulate the economy.”
But look on the bright side…
We still have our biggest banks, and that’s something, isn’t it?
Yes? No? Maybe?
US on the wrong path
The thing is, as the economic numbers continue to disappoint, it should be crystal clear by now that the solution we’re betting on is not a solution at all…
We took the Keynesian route of printing money out the wazoo so that there would be enough liquidity and enough money in the economy so that people would have money to spend and buy things…
Which would cause demand to rise, and people would have to be hired to make more stuff to fill the higher demand.
See how well that has worked?
There’s only one fly in that chardonnay…the money never got to “the people.” It went straight to the banks…
Who then turned around and lent it to the government in the form of buying T-bills.
No risk, no loss, no problem. The huge banks that made all those bad loans are taken care of…and in return, they’re taking care of the hand that feeds them.
Hint: That’s not you or me.
So you see, spending trillions of dollars in stimulus isn’t stimulus at all…
It’s just a plan to bail out the banks and to hell with the rest of the country. The money comes from the top, drops down to the banking sector, maybe to some mega corporations, and then is returned to the top with a nice profit.
This isn't that 1% bollocks that we've seen the past year or so, this is the government and the banks short-circuiting capitalism.
It’s all nice, neat and clean. The government coordinates monetary policy and colludes with corporate America to coordinate investment and economic growth. That would be the same “growth” strategy that the US is now urging Europe to follow.
There’s a name for that, by the way…
Because the banks and large corporations are among the few sectors that are doing well in this “recovery.”
Europe on wrong path, too
“But wait,” supporters will say as they point to Europe, “look over there; they’re trying austerity and look at the problems that it’s causing.”
And it’s true; austerity is causing huge problems in Europe. The Eurozone leaders decided that rather than try to cure a debt crisis with more debt…
They decided that they would focus on cutting public budgets, pensions, and other entitlements, which has thrown the PIIGS economies back into recession, or, if we speak plainly, depression.
Unemployment in Greece, Italy and Spain is staggering; up to 25% or more in some areas, with 50% of the young unemployed and GDPs cratering. Greece’s fell 7% in the 4th quarter of 2011 alone!
While people are being thrown out of work, the Eurozone bankers are forcing private holders of sovereign debt to take huge haircuts on their bond investments in Greece and Italy…
While also pouring hundred of billions of euros into the banks as way of restoring financial solvency to places like Greece, Portugal, and Italy…and soon, perhaps, even Spain.
But again, is the money going into the economies where it is needed?
Hell no.
European bankers are turning right around and depositing their bailout money into the European Central Bank for safekeeping and a small but riskless yield. Eurozone banks won’t even lend to themselves over night. What are the chances they’ll lend to people in small business?
Zilch.
So again, what do we see?
Careful coordination between governments and banks at the expense of guess who?
Again, there is a name for what’s happening there…
And by the way, who was put in charge of Greece and Italy overnight? Who replaced the elected leaders of those countries? Bankers. Big bankers from the Federal Reserve and the IMF, that’s who.
And who voted on replacing those leaders?
Nobody.
So in Europe, the banks are bailed out, and the rest of the country is screwed.
Isn’t it ironic that both policies, the Keynesian massive debt road that the US is on, and the rigorous austerity policies of the Eurozone, both benefit the banks and put the people under great hardship?
What a coincidence.
Iceland shows the way out
But is there a third way out of this mess?
There is…if you’re Iceland.
If you recall, Iceland was the first country to be hit by the Financial Crisis. Iceland’s banks had loans out to other countries that amounted up to 7 times the country’s GDP.
When the crisis hit, Iceland protected the people’s deposits in the banks, but decided not to bail out the banks. It let them fail and fail they did.
Were there tough economic consequences for Iceland?
Yes there were. People were out of work. Money was scarce. But Iceland refused to bail out the banks on the backs of the people for making bad bets.
And just how did Iceland decide not to bail out the banks and not to pay their foreign creditors?
The people of Iceland voted on it and they said, “no.”
Iceland’s credit was severely downgraded, of course, and that meant that Iceland would be in its own austerity program…
But here’s the difference…it was by its own decision, not some IMF bankers’.
And, just to send the right message, Iceland prosecuted the former prime minister for allowing such poor financial decisions to be made.
Today, Iceland is on the road to recovery. No riots. No banks on fire. No drama.
Oh, and one more thing…
No fascism, either; which unfortunately, is the proper name for what is happening in Europe and America right now.
And those are…The Gorrie Details.
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Gerri Baker
June 5, 2012 at 12:01 pm
I'm one of the little people trying to protect my savings over a life time. Thank you for simple straight forward information about what our greedy (and should I say stupid) leaders are doing. How Sad.History has the answers of right and wrong doings. Too bad no one except Iceland has enough intelligence. THANK YOU!
James R. Gorrie
June 8, 2012 at 4:53 pm
You're welcome. There are a few other examples in the world. But it's not too late. Hope and optimism live on!