All this has happened and hundreds of millions of lives have been severely affected because of the claim that there was ‘no alternative’ to bailing out the banks that had caused the problem. But the people of Iceland have shown that this is nonsense. You would have heard a great deal about Iceland in 2008 when its banking system suffered a monumental and extraordinary collapse. It was, relative to the size of the Icelandic economy, the biggest banking crash in economic history.
You hear very little about Iceland today because of the way its population of 320,000 dealt with the enormous challenges they were suddenly facing. Don’t mention Iceland – Shhhhhh! There is nothing more dangerous to ‘no alternative’ than another alternative that works … the threat of a good example.
So Iceland? Schtum.
Today, just three years later, Iceland’s economy is recovering from the biggest comparative banking collapse in history because … they didn’t bail out the banks – they let them fail. Those who caused the problem took the consequences. This was the result of the Icelandic people refusing to take the hit for the mess the banks had created.
It was not the Icelandic people who chose to invest in the seriously dodgy foreign investor accounts promoted by Iceland’s private banks offering a better rate of return – it was the overseas investors. Why should those who didn’t own the banks repay the losses of private owners and investors in those banks? That was the stance of the Icelandic people and they were not budging.
What happens when you do bailout private banks with public debt.