Iceland Forgives Household Debt and Now leads the Way to Economic Recovery Posted on April 16, 2012 by Neil Garfield
“Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.“
It’s Not a Theory When it was Wrong from the Beginning, The Highest Form of Economic Stimulus is to Correct Debt Balances
Editor’s Comment: Iceland has taken the obvious common sense approach — fueled by an outraged population — and ended up creating the largest fiscal stimulus of any developed country without spending one cent of taxpayer money and without printing any “quantitative easing” currency debasing their currency. By the way more than 90 bankers there are headed for jail.
Sounds like magic?
That is what U.S. Banks would have you believe. But it is true as you can see from the Bloomberg article below. The problem has been that the populations cannot pay the interest or the principal on debts that were so exotic in their construction that Alan Greenspan confesses he never understood them, let alone the borrowers. Borrowers were forced to rely on misrepresentations by the Banks and their agents as to the value of the loan, the value of the collateral and the viability of the transaction. People in Iceland rioted in the streets throwing rocks at politicians and government buildings — not because they owed the money but because they knew that (a) they were victims of bank fraud and (b) the banks owed them money, not the other way around. Under pressure from the government, the banks have decreased household debt by around 25% so far.
The banks have not collapsed, financial system is in good shape and Iceland leads the developed world in economic recovery. The risk fell back on the Banks, the perpetrators of this mess. The relief was and is being shared by two victims — the households tricked into buying these debt packages and the investors who pooled their money to fund the exotic debt structures. The claims of bank losses have been ignored as being not (and never were) economically real. That’s what happens when the populations rises up and says “NO!” Similar programs here even on a small scale have corroborated the Iceland experience.
And yet we continue to support the banks whom we believe are too big to fail. Following the Iceland example — now in its 3rd year — would provide many trillions of dollars in fiscal stimulus to our economy, launch the economy into a full recovery and clear up the budget deficits of local, state and federal government agencies. It’s a choice.
What do you choose?
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