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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Mary Cluney who wrote (220326)	3/23/2013 2:06:19 PM
From: Steve Lokness	Read Replies (1) \| Respond to of 542233

It seems others have called Krugman out on his initial one sentence on Iceland similarities from his earlier blog entry - and he is now seemingly trying to belatedly justify his comments. More importantly in his initial blog entry Krugman doesn't even mention Russia. Here is very first part of my response to that blog entry; <<<<<<How is this piece helpful John? Why not call Cypress what it is - a clearing house for illegal monies from Russia. To lump Cypress with Iceland is idiotic in the extreme.>>>>>> Here FINALLY at least Krugman is up to speed about the role of the Russian ill gained monied interest, but of course that makes the weird attempt to compare Cyprus to Iceland all the more of a contortion! So let me continue with the differences between Iceland and Cyprus. 1) In Cyprus the money coming into the banks was corrupt money that was just turned back to Russia - as Krugman points out. In Iceland, on the other hand, the money wasn't coming in from "money-laundering" (Krugman must have read my comments to john!) but from Europeans just looking at a high return. And here's the big issue; 2) The people who benefited from the Cyprus money laundering were the Russians. In Iceland it was the people who were the beneficiaries of all that money flowing into their country. - Remember the stories of everyone buying big huge SUV's in Iceland and some people so desperate they burned them to get the insurance money? 3) Unlike Iceland where the contagion was contained because the money was borrowed internally, in the Cyprus mess the money was loaned to a third party player - Greece. Sooo, when the Greek bonds went south - that the Cyprus money was invested in - it in turn brought down the Cypriot banking system. 4) Culturally - are there two countries in the EU that are further apart? This is a concept that Krugman with blinders on misses as he is so focused on numbers. 5) Cyprus is a member of the EU and uses the Euro - Iceland was not at the time of their meltdown. HUGE difference because Iceland could do a devaluation of their currency Cyprus CAN NOT without leaving the Euro first. What does Krugman have right? To be fair Krugman points out the problem with allowing banks to run unregulated and that they can't seem to control themselves. I agree! Krugman is spot on about that. But once again even seeing this problem, he seems to never to be able to understand the root problem - too much debt. The people in Iceland accumulated waaaaaaaay too much debt than they could ever pay back. Simple fact! Yes, the banks loaned them the money but still who is ultimately responsible. In Cyprus OTOH, it was Greece that failed to make good because they were living beyond their means. Now does anyone in their right mind think this problem can be solved by Keynesian type spending?