The Resignation of the Government of Iceland

[Mercedes Benzene]

Iceland's coalition government has collapsed as a result of an escalating economic crisis.

 

Prime Minister Geir Haarde announced the immediate resignation of his cabinet, after talks with coalition partners failed.

BBC NEWS | Europe | Crisis claims Iceland government

 

I'm not an expert on Icelandic government, but it sounds bad. :hihi:

Thoughts?

[Tormod]

Iceland is in *very* serious trouble. Not only is the population very small for a country (about 320,000 people) but their economy has been so torn up that it is hard to see how they can recover within even a century. The national debt is incredible, and lots of people have lost everything during the financial crisis - homes, work, everything - yet their personal debt remains.

 

I read in a Norwegian paper yesterday that the national debt now is so big that children who are born now will not live to see the debt be repaid.

 

They will need serious help IMHO.

[Little Bang]

Bet our national debt in the US is even bigger per person.

[CraigD]

Bet our national debt in the US is even bigger per person.

I’ll take that bet! :)

 

Estimates of real national debts are complicated and uncertain, but the US national debt of about US$10,554,000,000,000 and its population of about 306,700,000 gives a per-capita debt of about $35,000/person, Iceland’s of about 6 times its GDP of US$20,000,000,000, US$120,000,000,000, and its population of about 319,800 gives about $375,000. So the per-capita debt of Iceland is about 10 times that of the US.

 

My skill at solving such problems goes not much beyond simple arithmetic like the above, so I’ve only the barest ideas what, structurally, Iceland’s economic crisis is, its causes, or how it could be solve. Given how complicated financial structures are, I’ll jump straight to considering the crisis’s causes.

 

From very sparse reading, I gather that the main cause of it is that much of the assets of its largest banks are in the form of investments outside of Iceland, and that many of these have dramatically lost value in the past 18 months. The cause of these turned-out-to-be-bad investments appears to have been Iceland’s government’s deregulation of banks in 2001.

 

I’m speculating wildly now, but suspect that Iceland’s government may have come under influences similar to the US’s, where ideologically-based claims that less government regulation of nearly everything, were advanced over more sound economic theory and practices. The solution to the crisis appears to be soundly designed bank re-regulation. A complicating factor, however, will be avoiding various kinds of economic collapse, such as crippling loss of national currency value vs. more stable currencies.

 

Icelanders are sophisticated, first-world people. I hope their government, bankers, and other experts will be able to solve this crisis. Considering that they might fail, I like to apply a standard I call “will we all starve/freeze?”. By this standard, Iceland appears to be OK, because they’re an island in the midst of good fishing grounds, and have most of their essential energy needs met by renewable sources, especially hydro and geothermal.

 

All of the information I’ve used to form my opinions is from the wikipedia article “2008-2009 Icelandic financial crisis”

[Dutchdivco]

Actually, I think the same thing is true in most countries, its just that with Icelands small popualtion, its more,...obvious? Remember how Paulson requested the 7oo billion, initially, to 'buy up the toxic assets of the banks'. But, in the 2 weeks that it took to get Congress to o.k. it, he changed his mind about how to use it. i think thats because he found out, (during those 2 weeks) that 700 billion wouldn't begin to be enough to buy up the toxic assets.Thats why he shifted to buying stock in the banks.

Irony of ironies; Saw a news show on the network, couple of weeks ago. They were going to reporters in major capitals around the world, to show the global nature of the 'crises'.London, Moscow, Berlin, paris, Bejing, Tokyo, New York, etc. and each reporter was saying the same thing; no lending, forclosures up, unemployment up, consumption down, stores closing. Until, that is, they got to the reporter in,......BAGDAD, Iraq! The reporter explained that noone there uses loans to buy big ticket items like a house or car; Buyer and seller meet at the buyers bank and transfer the full price, there.Therefore, the worldwide financial crises has passed them by; There stock market is up 30% in the last 3 mos.! Who woulda thought! Jim