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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (68682)	11/25/2010 11:55:05 AM
From: elmatador	Respond to of 217716

"Iceland actually looks a bit better than Ireland" Lands of Ice and Ire Back in early 2009, it was supposed to be gallows humor: What’s the difference between Iceland and Ireland? Answer: One letter and about six months. Almost two years on, the joke is on the jokers: despite epic irresponsibility on the part of its bankers, on a scale that makes Irish bankers look like Jimmy Stewart, at this point Iceland actually looks a bit better than Ireland. I wrote about the surprising resilience of Iceland a while back. Since then, Ireland has had a bit of growth, while Iceland had a modest setback in the first half of 2010 (partly thanks to the volcano). Using Eurostat data, we now have this: Eurostat Slightly worse (but within measurement error) GDP performance in Iceland, but substantially less bad employment performance. And don’t get me started on Latvia and Estonia. The IMF’s latest report on Iceland is remarkably chipper: Under the recovery program, Iceland’s recession has been shallower than expected, and no worse than in less hard-hit countries. At the same time, the krona has stabilized at a competitive level, inflation has come down from 18 to under 5 percent, and CDS spreads have dropped from around 1000 to about 300 basis points. Current account deficits have unwound, and international reserves have been built up, while private sector bankruptcies have led to a marked decline in external debt, to around 300 percent of GDP. Oh, and while the IMF is demanding that Ireland cut minimum wages and reduce unemployment benefits, its mission to Iceland praised the “focus on preserving Iceland’s valued Nordic social welfare model.” What’s going on here? In a nutshell, Ireland has been orthodox and responsible — guaranteeing all debts, engaging in savage austerity to try to pay for the cost of those guarantees, and, of course, staying on the euro. Iceland has been heterodox: capital controls, large devaluation, and a lot of debt restructuring — notice that wonderful line from the IMF, above, about how “private sector bankruptcies have led to a marked decline in external debt”. Bankrupting yourself to recovery! Seriously. And guess what: heterodoxy is working a whole lot better than orthodoxy.