Icelandic Banking Suggestion

shanered

Follow Iceland's lead?
For years since the 2008 crash our altanltic cousins in Iceland seem to be pioneering their own way back to national health.

Please Read below:


http://www.zerohedge.com/news/2015-04-01/iceland-stuns-banks-plans-take-back-power-create-money

Do you think its a good idea and do you believe Ireland should be going the Icelandic direction more so then the Euro route?

Slydice

Take a research based approach to your question about both bubbles bursting.

• Find out what type of situation Ireland and Iceland were in about a decade beforehand, say 1998.
• Detail out what was similar and what was different between the countries for yourself.
• Find out what changes happened to both countries in the 10 years to the respective crashes. Like Irelands dotcom bust and celtic tiger and Icelands involvement in the global carry trade.
• Figure out what kind of Crashes the two countries experienced.
• Again detail out what was similar and what was different for yourself.
• Find out what changes have happened since the Crashes. Like Irelands Austerity, GPD increases etc and Icelands nationalisations, banker jailings and legal court cases with England etc.
• Now Figure out what kind of situation the two countries are in.
• Again detail out what was similar and what was different for yourself.
• Then figure out the pros and cons of the actions identified in the article you linked to and what type of situations countries have to be in to make use of the pros and cons.
• Finally set out argument for and against taking thoses actions for both countries.

Simples*



*might not be simples



Could write a book afterwards. Though... how many people would read a book on the comparative economic, political and social strategies of Ireland and Iceland between 1998 and now would probably be debatable.

Fr Tod Umptious

The simple fact that we are in the Euro and Iceland have never been makes any comparison between the two an exercise in futility.

Sand

Iceland being outside the EU and Eurozone was supposed to be a disadvantage. Ireland being under the remit of the ECB was a huge benefit apparently. There was a lot of pre-emptive schadenfreud and doom mongering about what would happen to Iceland for daring to not comply. Fast forward a couple of years and Iceland is recovering nicely, under its own steam and has cancelled efforts to join the EU.

They calculated (rightly imo) that had they been in the EU/ECB they would not have successfully resisted efforts to shackle them with the losses of UK and Dutch investors, or taking the necessary steps to regenerate their economy and indeed their country.

Meanwhile Ireland is in the pathetic position of trying to resist the terms of the fiscal compact which the Irish government campaigned *for* only 3 years ago. Its the perfect summary of the short sighted and contradictory response to the crisis in Ireland, and the significant drawbacks for small states who are members of the EU/Eurozone. Bad ideas of the major players in the Eurozone are implemented, not because they're correct or discussed, but because the major players say they must be. Fiscal discipline *is* important, but because its imposed on Ireland under dire threats and promises of conditional aid, the Irish government never takes any genuine ownership of the concept of fiscal discipline. Nothing has been learnt, first election comes along and the old pattern reasserts itself.

But its right to say that this topic is done and over. Ireland and Iceland were and are in different scenarios. Iceland made their choices, Ireland made their choices - you don't get a second chance. The key lesson Ireland can learn from Iceland is that Iceland *always* operated in its own interests, and for itself. Ireland, through nativity or fear, *always* failed to operate in its own interests. Sovereignty was surrendered a long time before the Troika arrived in Dublin.

There is absolutely no way the Icelandic *potential* plan would ever fly in the Eurozone. France and Germany have operated in the interests of their commerical banks throughout the crisis, they would never permit this. So it will never happen in the Eurozone, even if very beneficial to small open economies like Ireland.

Geniass

OP,

Can you tell us how the Icelanders are going to take away the control of creating money?

Do you understand what you have asked us to read?

Sand,

Are you seriously claiming Ireland joining the EU has been a negative?

Sand

Geniass wrote: »

Sand,

Are you seriously claiming Ireland joining the EU has been a negative?

Are you seriously claiming I claimed that Ireland joining the EU has been a negative?

micosoft

shanered wrote: »

Follow Iceland's lead?
For years since the 2008 crash our altanltic cousins in Iceland seem to be pioneering their own way back to national health.

Please Read below:


http://www.zerohedge.com/news/2015-04-01/iceland-stuns-banks-plans-take-back-power-create-money

Do you think its a good idea and do you believe Ireland should be going the Icelandic direction more so then the Euro route?

It's like every snake-oil salesman ever has been reborn to solve the financial crisis. It always takes the same form...

Step 1. Make a fundemental change to the economic system of the country (which show a complete failure to understand economics) that sounds plausible. And most of all a completely painless method that means getting massive amounts of money from some abstract source that means nobody suffers except maybe the 1%. Throw in a few comments out of context by plausible economists. Add a little conspiracy thinking.

Step 2. ???

Step 3. We're all Rich!!!


The only thing Iceland has pioneered are capital controls which are destroying it's economy as an investment proposition. That article immediately falls down at the first hurdle in that it does not say anything about people borrowing a different currency to the Icelandic Krona. Most of the borrowings were in US$ UK£ and EU€. That's the actual problem since none of these debts have devalued unlike the Krona. Ireland is racing ahead of Iceland. That's the reality.


* May have stolen this from elves in Southpark except they had a more plausible plan - Collect Underpants -> ??? -> Rich!

View

shanered wrote: »

Follow Iceland's lead?
For years since the 2008 crash our altanltic cousins in Iceland seem to be pioneering their own way back to national health.

Their currency HALVED in value in 2008 and years later has barely altered from that level.

That means all imports - which in Iceland's case is most of the goods they consume - basically doubled in price back in 2008.

Needless to say their salaries did not do so which means for the average Icelandic family a task such as buying the family car is a colossal financial burden.

How exactly is that pioneering their way back to financial health?

hmmm

Iceland are still trying desperate unorthodox measures to get their economy restarted, while Ireland is hitting 4% growth because we did the obvious thing and knuckled down and stopped living beyond our means. Another failure for the quick-fix crowd who told us should be "more like Iceland".

shanered

http://eng.forsaetisraduneyti.is/media/Skyrslur/monetary-reform.pdf

Please find the link to the paper being discussed by iceland

"1.1 Abstract
This report is a study of monetary problems in Iceland and in what
part they may be caused by the current monetary mechanism, the
fractional reserve system.
There is indication that the fractional reserve system may have
limited the Central Bank's ability to control the money supply while
giving banks both the power and incentive to create too much money.
Indeed, commercial banks expanded the money supply nineteen-fold
in the fourteen year period that ended with the banking crisis of 2008.
There is also indication that the fractional reserve system may have
been a long term contributing factor to various monetary problems in
Iceland, including: hyperinflation in the 1980s, chronic inflation,
devaluations of the Icelandic Krona (ISK), high interest rates, the
government foregoes income from money creation, and growing debt
of private and public sectors.
Economists have long been aware of the problematic nature of the
fractional reserve system and proposed various reforms. A program
for monetary reform by Fisher et al in 1939 received the support of
235 economists from 157 universities and colleges but was not implemented.
This report reviews some of the more frequently mentioned
proposals for monetary reform: 100% Reserves, Narrow Banking,
Limited Purpose Banking and describes in detail the Sovereign Money
proposal.
In a Sovereign Money system, only the central bank, owned by the
state, may create money as coin, notes or electronic money.
Commercial banks would be prevented from creating money.
This report describes how such a Sovereign Money system could be
implemented and what steps would be required for a successful
transition. "

realitykeeper

Fr Tod Umptious wrote: »

The simple fact that we are in the Euro and Iceland have never been makes any comparison between the two an exercise in futility.

I disagree. The fact that Ireland was in the Euro meant that it could bailout the banks whereas Iceland could not. However, despite the lies to the contrary, Ireland did not have to bail out its banks. Ireland choose to bail out its banks. It was the soft option because it meant immediate grinding austerity on a massive scale could be kicked down the road. It was also the wrong decision.

The depression the government were trying to avoid must happen, and it will, on a far worse scale because of the borrowed billions they used to bail out the banks. It is only a question of when. One thing is certain however, the more Ireland seems to be "recovering", the harder the crash must be. It is the natural order for the recession to happen. It cannot, not happen.

pwurple

Jaysus. As someone who has been to Iceland a coupla times, their economy is the LAST thing I'd want to replicate. It is crucifyingly expensive to do anything in Iceland. They resort a lot to black market, which sounds like tonnes of Short term fun I'm sure, until you ever want to leave the place, and all you've got is a sack of dried fish and a round neck woolly jumper to your name, for a lifetime of work.

K-9

realitykeeper wrote: »

I disagree. The fact that Ireland was in the Euro meant that it could bailout the banks whereas Iceland could not. However, despite the lies to the contrary, Ireland did not have to bail out its banks. Ireland choose to bail out its banks. It was the soft option because it meant immediate grinding austerity on a massive scale could be kicked down the road. It was also the wrong decision.

The depression the government were trying to avoid must happen, and it will, on a far worse scale because of the borrowed billions they used to bail out the banks. It is only a question of when. One thing is certain however, the more Ireland seems to be "recovering", the harder the crash must be. It is the natural
order for the recession to happen. It cannot, not happen.

Really though isn't it a bit of a circular argument? The reason we couldn't feasibly let the banks fail is the reason our recovery bus stronger?

Really it comes down to the advantages of belonging to a huge trading bloc, a country that is heavily dependent on exports, multinationals, big pharma, financials, being a business friendly member of a group that is oft considered anti business.

realitykeeper

hmmm wrote: »

Iceland are still trying desperate unorthodox measures to get their economy restarted, while Ireland is hitting 4% growth because we did the obvious thing and knuckled down and stopped living beyond our means. Another failure for the quick-fix crowd who told us should be "more like Iceland".

I could not disagree with you more. The simple fact is Iceland were right and Ireland got it wrong. This will become abundantly clear before the end of this decade. There is nothing unorthodox about capitalism. The Bolshevik approach that Ireland took will absolutely, positively, definitely end in catastrophe.

Jim2007

realitykeeper wrote: »

The simple fact is Iceland were right and Ireland got it wrong.

Iceland is still charging an 39% tax exit tax, not even Greece had to do that.

djpbarry

realitykeeper wrote: »

The simple fact is Iceland were right and Ireland got it wrong.

Wouldn't be the first time you've confused "fact" and "opinion".

realitykeeper

djpbarry wrote: »

Wouldn't be the first time you've confused "fact" and "opinion".

You are assuming my opinion is not a fact. Time will tell who is right.

Godge

realitykeeper wrote: »

You are assuming my opinion is not a fact. Time will tell who is right.

https://stats.oecd.org/Index.aspx?DataSetCode=PDB_LV


GDP per capita in Ireland was 45% higher than Iceland in 2007, it is 47% higher in the latest figures. Looks like Ireland was right.

http://www.prosperity.com/#!/ranking


In the prosperity index Ireland is higher than Iceland.

So I think I for one will keep assuming your opinion is not a fact.

irishgrover

realitykeeper wrote: »

You are assuming my opinion is not a fact. Time will tell who is right.

Generally speaking an opinion or hypothesis or idea or whatever, becomes a "fact" only when it has happened.
It's a similar concern as risk and risk mitigation. There may be a 0.1% risk that something will happen or a 99.999% that something will happen. If there is a 0% chance or a 100% change that something will / will not happen then it is no longer a "Risk" it is a "Fact".
I can absolutely guarantee that at the moment your opinion is only that, an opinion. It may become a fact in time, if it happens with 100% certainty. However in fairness at the moment is only an opinion. I'm not judging the validity or otherwise of your opinion, but in fairness you can't really call it a fact, at all.

djpbarry

realitykeeper wrote: »

You are assuming my opinion is not a fact.

Oh, I'm not assuming...

realitykeeper

djpbarry wrote: »

Oh, I'm not assuming...

Then you are expressing an opinion. Splendid! Now time will adjudicate on the wisdom (or otherwise) of your opinion.

Zubeneschamali

realitykeeper wrote: »

Then you are expressing an opinion. Splendid!

Are admitting that your opinions are not facts?

Unless hyperinflation actually happens?

realitykeeper

Zubeneschamali wrote: »

Are admitting that your opinions are not facts?

Unless hyperinflation actually happens?

How can I know my opinion isn`t a fact since hyperinflation could happen (and in my opinion will happen).