What's up with Iceland

Discussion in 'Politics' started by helgaleena, Jul 23, 2011.

  1. helgaleena

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  2. Jason

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    Iceland has dealt with its crisis in the tried and tested way: default, devaluation, austerity. It has worked. Iceland is on the up. It will get poor rates in bond markets which will hamper future economic growth, but this is a small downside.

    It is very likely that there are culpable Icelandic bankers. But also there was abysmal regulation of banks from the Icelandic nation state. By all means go after bankers - but go after the politicians as well. The blame pot is also big enough to blame the people of Iceland who voted for politicians who were promising them wealth from dodgy banking. In the end in any democracy the people are to blame.
     
  3. dandelion

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    What, when those with power and knowledge lie to them?
     
  4. vince

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    The people of Iceland are paying with austerity, high interest rates, unemployment and devaluation. I think they already are sharing their part of the blame and they are totally correct to investigate and punish deceptive or incompetent politicians and financiers.
     
  5. zpacifico

    zpacifico New Member

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    The people of Iceland (nor any other people in general) should be responsible in paying back for something that PRIVATE owned companies have lost.
     
  6. Jason

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    If privately-owned banks are so lighty regulated that they make enormous profits and make a whole nation incredibly rich, then the people consider this is fine and enjoy their amazing wealth.

    If privately-owned banks are so lighty regulated that they make enormous losses and make a whole nation very poor, then the people considers this is the bankers' fault and the bankers should pay.

    We need voters to wise up. Political parties that promise riches without the hard work are playing a con trick. The bankers have been the tool. Lets regulate banks so lightly that they can break all the rules and make everyone rich (and lets hope it doesn't go pop until the other party is in power). Yes bankers (in Iceland and anywhere else) have some questions to answer - but so do the politicians and so do the people who voted them in. Democracy comes with responsibilities.

    The big danger for the global economy is that we now go to the other extreme and demonise banks. But I suppose it is so much easier to say that those horrible bankers got it wrong rather than we people got it wrong. The former is comfortable outrage at someone elsse's mistake; the latter requires that people rethink what they can expect from life.
     
  7. dandelion

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    Light regulation may allow banks to take risks but does not require them to take risks. The reality seems to be that the free market has required them to take risks, because taking risks means greater profits and the shareholders have obliged the banks to maximise their profits.

    Banks have hereto not been taxed any differently to other companies, so it is entirely untrue to suggest they have been 'milked' by government or society and so deserve special treatment. If anything, their unique financial expertise has allowed them to avoid taxes ordinary companies would pay.

    In the days of the failing british motor industry the govenment considered its options and chose to underwrite the companies debts, though in the process taking ownership away from the original shareholders under whose control the companies had been bankrupted.

    The situation with banks is different in two respects. First, the underlying business model of the banks is still viable and profitable, whereas the car companies were running at an ongoing loss. Second, the debts owed by banks dwarfed the debts owed by the car companies and threatened a cascade of ongoing bankruptcies as all parties who had deposited money with the bank found they had lost it. Choosing to subsidise the cars, the government chose to inject a relatively small but ongoing amount of cash. Choosing to subsidise the banks, the government took on a vast accrued debt in anticipation that the companies would then trade normally and profitably.

    It is not the case in any industry that a company is allowed to go scott free after some disaster just because no one had imposed rules on them restricting their behaviour. Normal rules of liability apply. They did it, they fix it. If a company has had a disaster, for example BP, then what generally happens is that rules are imposed to prevent the same thing happening again, and the company is punished. BP has been required to pay the cost of its oil spill and will be fined on top of the cleanup cost. It seems likely it will have great difficulties resuming oil operations at all in the US.

    I do not see why the same logic should not apply to banks. The risk is unacceptable and so cannot be permitted to repeat. Banks should also expect to pay for the damage.(on which basis I imagine not one of those at fault will ever show a profit again)
     
  8. helgaleena

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    In the USA there is FDIC to reassure bank customers, which was only invented after the crash of 1929. But we still get crazy situations like the mortgage scandals of recent years. I must agree with dandelion. Especially when some of the biggest banking players are now international and can shift away from local regulations in a flash.
     
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