There was an wonderful piece in the Financial Times recently, all about Iceland.
What? You don’t know about Iceland?
Iceland was very hard-hit by the recession of 2008-9. It had a couple of banks which were offering miraculous rates of interest back in the mid-2000s, and people from all over Europe (especially the UK) were putting their money there. Then the crash hit, and Iceland was hit hard, and those banks died.
What happened then?
The Icelandic government, out of necessity (it’s a small country) went on an austerity kick. It sought to increase revenue and decrease expenditures.
It’s a small country – did I say that before? – so its defense budget was not enormous. It made cuts across the board, but it cut social welfare programs less than other programs. Also: it increased taxes on wealthier individuals, but sheltered people who made less money.
Are you getting this?
Four years later, Iceland is doing very well. It’s almost completely recovered. Another thing: all the depositors who lost money in those failed Icelandic banks will (over time) get their money back. Not the investors in the banks, but the depositors. See?
There’s a lesson in here somewhere.
I wish I could figure out what it was.
No comments:
Post a Comment