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Let Banks Fail Is Iceland Mantra As 2% Joblessness In Sight

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http://www.bloomberg.com/news/2014-01-27/let-banks-fail-becomes-iceland-mantra-as-2-joblessness-in-sight.html

Iceland let its banks fail in 2008 because they proved too big to save.

Now, the island is finding crisis-management decisions made half a decade ago have put it on a trajectory that’s turned 2 percent unemployment into a realistic goal.

While the euro area grapples with record joblessness, led by more than 25 percent in Greece and Spain, only about 4 percent of Iceland’s labor force is without work. Prime MinisterSigmundur D. Gunnlaugsson says even that’s too high.

“Politicians always have something to worry about,” the 38-year-old said in an interview last week. “We’d like to see unemployment going from where it’s now -- around 4 percent -- to under 2 percent, which may sound strange to most other western countries, but Icelanders aren’t accustomed to unemployment.”

The island’s sudden economic meltdown in October 2008 made international headlines as a debt-fueled banking boom ended in a matter of weeks when funding markets froze. Policy makers overseeing the $14 billion economy refused to back the banks, which subsequently defaulted on $85 billion. The government’s decision to protect state finances left it with the means to continue social support programs that shielded Icelanders from penury during the worst financial crisis in six decades.

We can't have this type of dangerous nonsense, letting banks fail what type of socialist nonsense is this!

A jobless recovery is the only way forward out of this mess, 2% unemployment rate. How ridiculous is that!

Austerity is the way forward Iceland needs to see the light before it's too late.

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Iceland is back in another property bubble:

Iceland’s property market remains strong, amidst improving economic conditions.

The nationwide residential property price index rose by 6.9% during the year to October 2013, the highest year-on-year increase since June 2012, according to the Statistics Iceland.

Iceland-house-prices-1.gif

http://www.globalpropertyguide.com/Europe/Iceland

We will see what happens to their economy when this one pops.

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Out of interest, did private Icelandic investors loose their savings in these banks?

I wouldn't be surprised if Brown bailed them out too in the off chance they had dual citizenship and hence a vote in the UK general election.

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Iceland is back in another property bubble:

The consequence of moral hazard? If you never let people burn their fingers, how are they going to learn not to put them in the fire?

To save the economy and to help homeowners, Iceland’s state-controlled banks have forgiven mortgage loans for more than 25% of the population since end-2008, equivalent to about 13% of the country’s annual GDP.

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I wouldn't be surprised if Brown bailed them out too in the off chance they had dual citizenship and hence a vote in the UK general election.

Nah the Icelanders hate him almost as much as us, he had their nation listed as a terrorist state and froze their assets.

http://firedoglake.com/2008/10/25/nordic-terror-uk-puts-iceland-on-terrorist-list/

They like Putin though, as do I.

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If memory serves everyone outside Iceland lost, but Icelanders kept the money.

No, not all.

Private depositors in the UK had their money returned. However I believe a lot of councils with very large deposits took loses.

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The consequence of moral hazard? If you never let people burn their fingers, how are they going to learn not to put them in the fire?

I suppose a risk-averse bank operating in an environment in which it would have to bear any losses should simply refuse to make loans which have a high chance of not being repaid. In this scenario ordinary punters would never get their hands on any fire with which to burn themselves.

It doesn't sound like the banks are acting this way though. Since their HPC wasn't very deep or long-lasting, maybe they think the government would try to stop a proper HPC of 50%+. I'm sure Icelandic homeowners were happy to see their government telling hedge funds to naff off and writing mortgage debt off, but I wonder if they would have felt the same if their house prices had been seriously tumbling.

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No, not all.

Private depositors in the UK had their money returned. However I believe a lot of councils with very large deposits took loses.

I think not. Private UK depositors lost their money but were reimbursed, for political reasons, courtesy of the UK taxpayer, by the MP for Kirkcaldy and Cowdenbeath.

330px-Gordon_Brown_official.jpg

post-11769-0-46969200-1390822199_thumb.j

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I think not. Private UK depositors lost their money but were reimbursed, for political reasons, courtesy of the UK taxpayer, by the MP for Kirkcaldy and Cowdenbeath.

After getting their tax free (easy to hide) interest rate of 7-8% i believe it was.

Invest in foreign lands and still get a taxpayer handout.

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Ordinary Icelanders are even more exposed to the property market than the British. 83% of Icelanders are owner-occupiers and about 70% of households have an outstanding mortgage. By comparison only 38% of UK households have an outstanding mortgage.

IS = Iceland

icelandtenure_zps065f743b.png

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-11-004/EN/KS-SF-11-004-EN.PDF

Edit: By the way, this graph rather puts the lie to the idea that Europe is a continent of happy renters. It isn't.

Edited by Dorkins

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Out of interest, did private Icelandic investors loose their savings in these banks?

Yes - some lost everything.

After the crash one of my Icelandic friends who worked in banking told me she was going to her sixth funeral in 5 months.

Many people were left with loans which were impossible to pay back and the shame of bankruptcy in such a small community was too overwhelming for some.

I last visited Reykjavik in Oct 2013 and felt that things were getting better - but not back to the old days.

There appeared to be a universal hatred of Gordon Brown in everyone I met!

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Yes - some lost everything.

After the crash one of my Icelandic friends who worked in banking told me she was going to her sixth funeral in 5 months.

Many people were left with loans which were impossible to pay back and the shame of bankruptcy in such a small community was too overwhelming for some.

I last visited Reykjavik in Oct 2013 and felt that things were getting better - but not back to the old days.

There appeared to be a universal hatred of Gordon Brown in everyone I met!

I see you are talking about people with loans, but my interest was in private individuals with money in the savings accounts of banks that folded.

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I see you are talking about people with loans, but my interest was in private individuals with money in the savings accounts of banks that folded.

Yes - I know of one Icelandic friend who lost 70K which she had invested.

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Yes - I know of one Icelandic friend who lost 70K which she had invested.

Ouch, was there a Government compensation scheme in place such as that run by the FSCS.? In the UK this seemed to work well during the last crisis.

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I'm deadly serious. As far as I know, no small UK saver lost money up to the FSCS compensation limit.

That wasn't the FCS, it was Gordon Brown/Labour who bailed out all UK savers, including the 8% interest, without limit, at the taxpayers expense, for political gain.

The prudent were ripped off to bail out the feckless :angry:.

Those who gambled their money in dodgy banks to get 8% instead of the more normal 4% and lost, won, at the taxpayers expense.

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Ouch, was there a Government compensation scheme in place such as that run by the FSCS.? In the UK this seemed to work well during the last crisis.

I don't know and I didn't ask more at the time - we quickly moved on to what she'd like to do to Gordon Brown.

But I believe from her reaction and emotions that she lost all her money.

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After getting their tax free (easy to hide) interest rate of 7-8% i believe it was.

Invest in foreign lands and still get a taxpayer handout.

Wrong! The bank was licensed to operate here, depositors paid UK taxes on the interest, and the government through the fscs offered compensation through the passport scheme.

UK depositors should have taken a hit of 20%, but that nice Mr Darling paid out in full.

I now believe that to be 40%

Edited by otters

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