Iceland

Iceland

“Remember when the Icelandics did the unthinkable and, unlike Ireland, told bank creditors to take a hike? They also imposed capital controls and allowed the value of their currency to fall – the Icelandic krona has lost almost half of its value against the euro over the past five years.

The ‘experts’ queued up to assure us that these latter-day Vikings would be severely punished for their impertinence. While no one forecast that a hole would open up in the North Atlantic and swallow Iceland whole, some of the predictions came pretty darned close.”

“In the financial markets, as elsewhere in life, eaten bread is soon forgotten. Would-be investors in Icelandic bonds focus most of their attention, not on what happened in the past, but on what is likely to happen in the future.

What these investors see is that, by burning the bank bondholders rather than taking these debts on to the national balance sheet, the Icelandic sovereign is in a far stronger position to repay any future debts.”

— “The economic return of Iceland has proved that the joke was on us,” Dan White, The Independent

Related:

“God Save the British Economy,” Adam Davidson, New York Times Magazine

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