Iceland found another way to clean up the financial crisis…Unlike the U.S., the country let its banks fail and bailed out lots of consumers.
❝ Last week, I was at an ETF conference in Reykjavík. As I was flying there, it dawned on me I know practically nothing of Iceland. What little understanding I had, had come second-hand, via Michael Lewis’ epic tale of Iceland’s financial collapse, “Wall Street on the Tundra.” His 10,000-word Vanity Fair missive is practically a Norse Saga of its own.
Lewis explores the Icelandic bubble in delicious detail. The short version is that the Icelandic banks scaled up their debts from a mere few billion dollars to over $140 billion, without growing the asset base at the same time. To quote Lewis quoting an economist, it was “the most rapid expansion of a banking system in the history of mankind…”
❝ Unlike here in the states or in Europe, the Icelanders told the bankers to piss off. Instead of bailing them out, they were sent into bankruptcy. The results were a fast and sharp decline, followed by a rapid, post-crisis economic recovery — faster and stronger than any other country in the world.
Excerpted from notes posted, today, on Barry Ritholtz’s blog…The Big Picture. At the end, he links to a larger piece he wrote for BLOOMBERG…Iceland Found Another Way to Clean Up a Financial Crisis. An interesting, educational read about an alternative solution to the Great Recession – that worked.
Completely separate; but, culturally important. Images of Iceland by Om Malik.