IMF: Iceland Was Right, We Were Wrong | Hacker News Reader

IMF: Iceland Was Right, We Were Wrong

thestreet.com

22 pointspeeplaja24 comments

This article is not up to the standards that we expect at HN.

I personally agree that Iceland did the right thing, but this article lacks depth and fails to properly put the decisions and motivations in context.

Iceland has 300k people. That is less than Brampton, Ontario, which the vast majority of the people on this board have never heard of.

Iceland could take the risk and follow more libertarian economic advice, but what of the United States? One thousand times the people and the world reserve currency. Wasn't going to happen.

Furthermore, Keynesian approaches may actually work, but part of the Keynesian model is for governments to reign in spending when tax receipts are high, which governments almost never do. But the economic right does have a point when they talk about the ever expanding deficits that end up undermining investor confidence, and that further debt for bailouts will do the same.

Brazil, with a ~200m population, used a Keynesian approach after the crisis, investing in infra-structure, lowering interest rates and stimulating the consumer economy. Result: the country sailed through and kept growing.

I don't think the size of a country is much of an excuse for it can or can't do (see: China).

Only a fool would underestimate sovereignty.

The story of Iceland is not Keynesianism vs Austerity. Rather it is about default (which is not what is generally advocated by keynesians) vs. making bond holders (especially politically privileged ones) whole by any means necessary (money printing, favored by keynesians or austerity favored by chicago school types.)

Iceland went full default and appears to have done well because of it. Greece has moved slowly into default-lite and is doing much worse. There are an infinite number of other variables at play (I think culture is particularly significant, for example) but it does offer some evidence for the full-default/reset approach.

This is absolutely the correct interpretation, though this article is appallingly badly written compared to the Bloomberg Businessweek original (http://www.businessweek.com/news/2012-08-12/imf-says-bailout...).

The reason why the IMF is critical to this is because of a (in)famous paper they released in September 2010 essentially formalising a past decade of IMF policy outlook called,

"Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely" - http://www.imf.org/external/pubs/ft/spn/2010/spn1012.pdf

Iceland is a perfect highly modern example of why sovereign default is such an effective recovery tool. Default has been historically proven as effective for thousands of years and often the ONLY recourse for states with unsustainable or structural debt overhangs (regardless of where or how that debt came from) that would cripple their future prospects or cause an immense medium term opportunity cost.

The key though is that default often forces institutions, policies and their regulatory frameworks to re-align with sustainable long term goals of the state as well as leave a lasting cultural mark on their people to never permit such mistakes again. Clearly, this has been the case for Iceland while amazingly retaining their welfare system.

What I find particulary impressive was their committment to apply capital controls despite some enormous, vociferously protected external claims, particularly those from much larger nations such as the UK.

Yep. They really did tell the international banking cartel to go to hell, and it worked almost exactly like the non-mainstream debt-centric economists (Steve Keen, etc.) predicted.

Amazing.

The source article is much more informative, and less of a rant: http://www.businessweek.com/news/2012-08-12/imf-says-bailout...

As an aside:

>When Plutarch wrote 2,000 years ago "an imbalance between rich and poor is the oldest and most fatal ailment of all Republics," he was not parroting socialist dogma (1,500 years before the birth of Socialism).

While it may not have been named or had a lot of the modern dogma attached, what could best be described as "egalitarian socialism" is the natural organization of hunter-gatherer bands. Which is why, though it works poorly for anything larger than a band, various "socialisms" regularly re-emerge throughout history.

This article is unreadable for points others have mentioned nonetheless starting to read it got me thinking...

Is anyone else thinking its about time someone proposed an applicable alternative to the free market system? It seems ridiculous to me that every country strives for economic growth and if there's no growth disaster strikes. Our current system that promotes speculative banking on global catastrophes, coorporate run governments, and an increasing descrepancy in wealth distribution, needs a viable alternative.

Is there a less inflammatory and more informative account? I can't even read this.

There is: http://www.businessweek.com/news/2012-08-12/imf-says-bailout...

I encourage you to post that one as its own submission, it's infinitely better.

(I'd do it myself, but you might already be planning on doing so, and I wouldn't want to steal your imaginary internet points ;])

Ah no, go ahead...I was just answering a question here - satisfied with that :)

Ah, turns out it was posted 22 hours ago, and only got a couple of points. I'll be upmodding that one over this one, then.

http://news.ycombinator.com/item?id=4401355

That article appears to be the original source of the comments, from what I can tell. Other stories citing the comments mention Daria Zakharova (the IMF mission chief for Iceland) giving them in "an interview with Bloomberg", which BusinessWeek is part of.

Another source would be much appreciated. I can't take any article that uses the term "banksters" seriously.

Sometimes the truth is inflammatory.

The interesting part for me is the self-serving marketing that the writer is doing. As a precious metals investor, it is in his best economic interests for people to believe this view as it can only speed the flight to gold.

If you're wondering how these all-emotion, pure-conjecture, it-must-be-a-conspiracy-theory, the-truth-is-in-me, we-have-the-purfect-solution, and frothing-at-the-mouth posts get upvoted to the front page?...

It's the same way that Kim Dotcom / TorretFreak articles do.

With regard to this one, this comment points it out well... http://www.thestreet.com/story/11665082/3/iceland-was-right-...

That comment won't load for me; could you summarize?

In addition to the obligatory "wow, that was horrible", I think there's value in saying that throwing the media under the bus, in this case, isn't particularly fair.

I'm no fan of modern-day news-making, but both sides have been well represented by the media. In particular, Paul Krguman has been all over this like a fat kid on a popsicle.

That was painful to read.

Iceland did the same as Argentina did back in the early 00's. With all the internal problems Argentina faces, with a gov that not everybody likes and a lot of etcs, their economy grows strong and they are paying the debts without asking for money anywhere.

http://www.cbsnews.com/8301-505123_162-57323068/comeback-cou...

http://www.jamaicaobserver.com/business/Argentina-celebrates...

There are still people in the U.S that don't know the the FED is a private company owned by the banks. I guess it's because of the fact that most people are dumb

Reply on news.ycombinator.com