(Source: AmericanNewsx) – Another banker just got sentenced to prison been an accomplice in the economic collapse in 2008, which makes it the 26th banker the country will be jailing this year.
The charges he was been jailed for included breach of fiduciary duties, market manipulation and embezzlement.
While most people think of Iceland, they visualize fire and ice. Major volcanoes and vast ice fields are plentiful due to its location on the northern part of the Mid-Atlantic Ridge. (A hot July day in Reykjavik is roughly 55 degrees.) Meanwhile, Iceland is also renowned for being one of the Nordic communist countries, with absolute universal health care, free education and many other Tea-Potty nightmares. Consequently, as you might imagine, they have a tendency of viewing and reacting to economic situations somewhat differently than the United States.
When the banking induced “2008 Great Recession of” struck, Iceland’s economic hit was amongst the hardest. Nevertheless, instead of rewarding dubious banking procedures with plenty of bailout money, they took a different approach.
Before the economic recession, Iceland had one of the more flourishing economies in the world, despite the fact that their total populace (327,000) wouldn’t even fill a medium size American city. When the recession struck, they were among the hardest and earliest hit. However, instead of turning to the vaults to shower the banks with money, they let the financial institutions fail. They also refuse traveling down the Republican /European strictn raod. Instead, they kept their social programs in place at a time when they were most required.
And, they sent dubious bankers to prison.
When the country 3 major banks collapsed, this resulted in non-payment totaling $114 billion in a country having a gross domestic product (GDP) of about $19 billion only. In O2008, october to be precise, the legislature passed emergency legislation to preside over the domestic activities of the major banks and created new banks to handle them. However, they did not eventually take over any of the foreign assets or duties. Those remained with the original banks, leading straight into bankruptcy.
Then charges were leveled against several banking executives for market manipulation and fraud, resulting in jail time ranging from four to five and a half years. The special prosecutor said, why should we have a part of our society that is not being controlled or a part without accountability?
In the United States, we simply hit a few wrists with small fines which resulted in being paid by their individual banks. (Can you say “got off scot free?”)
Sending the bank executives to prison for a few years did not resolve the problem, although it did send a message for them and others not to do that again.
At the worst stage of the economic recession, the Icelandic currency, the Icelandic krona (ISK) was trading at about 250 ISK per Euro. In order for Iceland to qualify for an international loan from the International Monetary Fund (IMF), Iceland increased their interest rates to 18 percent, which, in turn, attracted bank deposits. Iceland also got a $2.5 billion loan from Europe’s Nordic countries.
To boost its recovery, Iceland made use of its natural advantages as a country such as its, cheap, clean geothermal energy to draw out investments from the technology industry. Icelandic profit-making fishing remained strong, as the general global economy picked up; there was also a bloom in the tourist industry.
The intensely depreciated krona also turned out to be a blessing which made Iceland and Icelandic products extremely attractive, economically. On the banking part, they assisted the domestic debt by restructuring and fiscal amendments as conditions changed.
As Iceland battled intelligently battled their way out of the recession, this is what the International Monetary Fund Survey has to say regarding it:
Iceland has bounced back after the 2008/2009 economic recession and will soon exceed pre-crisis output levels with strong feat in tourism and fisheries. Their Debt ratios are on a decreasing path and balance sheets have largely been restored. The banking sector is back on its feet though with some important items still staying on the docket.
As the survey above also stated, Iceland is “the first 2008-2010 country with economic crisis in Europe to exceed its pre-crisis peak of economic output.”
The krona is now operating at 142 ISK per Euro. (Recovering from 290/1 in 2008) The inflation rate in 2014 was exactly 2.05 percent. (Down from 12.59 percent in 2008) The income index is running at 190.9. (Up from 132.8 in 2008)
Interestingly, they did all this while maintaining their social welfare which kept it intact. (There goes one more bagger day-dream.)
Olafur Ragnar Grimmson who is Iceland’s President, explained how the country managed to recuperate from the world financial catastrophe,
We were clever enough not to follow the conventional prevailing ways of the Western financial world in the previous 30 years. We introduced currency control measures, we purposefully let the banks fail, we gave support for the poor, and we didn’t introduce strict measures like you’re seeing in Europe.
When asked if or not other countries, Europe to be precise, would do well with Iceland’s “let the financial institutions fail” policy, President Ragnar gave his answer,
Why are the financial institutions considered to be the holy churches of the modern day economy? Why are private financial institution not like telecommunication and airlines companies and left to go bankrupt if they have been operated in an reckless way? The supposition that you have to bail out banks is a theory that you permit bankers enjoy for their own profit, their success, and then let normal people bear their failure through taxes and strictness. ? People in liberal democracies are not going to take that in the long run.