Guest Post: The Icelandic Success Story

Tyler Durden's picture

Submitted by John Aziz of Azizonomics

The Icelandic Success Story

Emotionally, I love Iceland’s financial policies since the crash of 2008:


Iceland went after the people who caused the crisis — the bankers who created and sold the junk products — and tried to shield the general population.

But what Iceland did is not just emotionally satisfying. Iceland is recovering, while the rest of the Western world — which bailed out the bankers and left the general population to pay for the bankers’ excess — is not.

Bloomberg reports:

Few countries blew up more spectacularly than Iceland in the 2008 financial crisis. The local stock market plunged 90 percent; unemployment rose ninefold; inflation shot to more than 18 percent; the country’s biggest banks all failed.

This was no post-Lehman Brothers recession: It was a depression. 


Since then, Iceland has turned in a pretty impressive performance. It has repaid International Monetary Fund rescue loans ahead of schedule. Growth this year will be about 2.5 percent, better than most developed economies. Unemployment has fallen by half. In February, Fitch Ratings restored the country’s investment-grade status, approvingly citing its “unorthodox crisis policy response.”

So what exactly did Iceland do?

First, they create an aid package for homeowners:

To homeowners with negative equity, the country offered write-offs that would wipe out debt above 110 percent of the property value. The government also provided means-tested subsidies to reduce mortgage-interest expenses: Those with lower earnings, less home equity and children were granted the most generous support.

Then, they redenominated foreign currency debt into devalued krone, effectively giving creditors a big haircut:

In June 2010, the nation’s Supreme Court gave debtors another break: Bank loans that were indexed to foreign currencies were declared illegal. Because the Icelandic krona plunged 80 percent during the crisis, the cost of repaying foreign debt more than doubled. The ruling let consumers repay the banks as if the loans were in krona.


These policies helped consumers erase debt equal to 13 percent of Iceland’s $14 billion economy. Now, consumers have money to spend on other things. It is no accident that the IMF, which granted Iceland loans without imposing its usual austerity strictures, says the recovery is driven by domestic demand.

What this meant is that unsustainable junk was liquidated. While I am no fan of nationalised banks and believe that eventually they should be sold off, there were no quick and easy bailouts that allowed the financial sector to continue with the same unsustainable bubble-based folly they practiced before the crisis (as has happened throughout the rest of the Western world).  

And best of all, Iceland prosecuted the people who caused the crisis, providing a real disincentive (as opposed to more bailouts and bonuses):

Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.


Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.


That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

Iceland’s approach is very much akin to what I have been advocating — write down the unsustainable debt, liquidate the junk corporations and banks that failed, disincentivise the behaviour that caused the crisis, and provide help to the ordinary individuals in the real economy (as opposed to phoney “stimulus” cash to campaign donors and big finance).

And Iceland has snapped out of its depression. The rest of the West, where banks continue to behave exactly as they did prior to the crisis, not so much.

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ultraticum's picture

If the banksters are imprisioned the people don't even need bailouts.  But, sadly, in Amerika 99% of the populace - and especially the gooberment - is too ignorant to have any inkling of their own serfdom.

HoaX's picture

The Icesave clients sure did need bailouts. The Dutch and British goverment took up that tab.

Not that I disagree with jailing the banksters responsible by the way ;)

grunk's picture

Iceland is obviously governed by terrorists.

I bet Iceland has chemical weapons.

upWising's picture

You know damn well they have WMDs and Chemistry Weapons.  You know they is turrurrists because they don't speak English, don't go to Church, they have EXTRA LETTERS in their alphabet that they use to cover up secret messages, and they don't have TREES.  I think them little Iceland Ponies is really CAMELS in disguise.  Them Icelander girls cover up themselfs up head-to-foot like Moooslums and makes escuses for doing it, saying "it's cold."  I think we need to round up all the Icelander Illegal Immigrants (the "I I I s") and ship them back to where they come from before they does us harm.

I hope Fox News starts covering this country that I know just hates Amercia.  Iceland is closer to New York than Las Vegas so we got to be vigilent!  I hope hope Hiltlery and the heritage Foundation people starts a Free Icelander Army to liberate them from there chains.   ICELAND is not NICELAND!!!

"Amercia is Jesus' Favorite Country ©"
"Jesus Watches Fox News ©" 

willwork4food's picture


You betcha, we got to get over there and kick those commie's butts all the way to the cross!! And ifa they dont want to go there we blow their shit away!!

Freddie's picture

The Fox swipe means you are a moron who actually watches TV like a good little serf.  All the networks, all of TV and all of Hollywood are shit you doofus serf.

TheFourthStooge-ing's picture

Yeah, Freddie, and you're enthralled by the media matrix as well, because the talk radio crackpots you get your news from are as much a part of it as anyone.

It's pretty funny how they got rubes like you to campaign for Obama. Just get all the "true believers" to rant like meth-addicted refugees from the set of Deliverance about Obama the Secret Moozlim® and it's guaranteed to push some of the undecideds into the Obama camp.

Be proud, Freddie, of your role in getting the president reelected. Considering his unpopularity, that's quite an accomplishment. Oh, and thanks for what you did for Santorum. The high kook factor among his supporters helped clear the path for Romney.

Big Corked Boots's picture

 Say what you want about those icy cold terrists. We wont be bombing them. They are white.

Dr. Sandi's picture

Tell that to the former residents of Dresden.

kliguy38's picture

OH yeh! They've got WMDs (Women Majestically Developed) ...I'll volunteer to go in on the "first wave" of the invasion

cognus's picture

you are a GIANT among elves...

I propose drone wedding parties and funerals first, call a UN conference on the plight of the rebels in Iceland, rollout twitt images of dead children and blame it on the people that engineered the turnaround, call for a UN resolution to force surprise inspections of their chemical plants [nevermind that they don't have any... unimportant to the narrative], have a few of our Al Queda friends blow up cars and bars, blame the government, demand resignations....  then through backchannel offer them generous loan packages with automatic rollover provisions

Waydown's picture

Iceland is Viking, ex-Danish, Viking, here we go again

dick cheneys ghost's picture


Great interview with the President of Iceland!!


btw, Fuck yu WaLL StrEEt

Yen Cross's picture

Long Arctic rights and Atlantic cod/  Good luck Dick! We have already explored the cost basis/

 It's not worth it. A massive solar flare might make it worthwhile to drill! 

Waydown's picture

To do what the Icelanders have done you need, first of all, one good pair, which is what I doubt are still left in the US

Yen Cross's picture

I'm certified diver, never in Iceland "airtight/dry suit" diving/ I have seen pictures of that untouched magma under water/ Giant grey cliffs for 1-200 meters drop off into oblivion.  Not much aquatic life/ No thanks...

Great Barrier Reef, is much better.



Cabreado's picture

You seem to be missing the point.

Good on you for being a certified diver.

I'm not one.

But I have visited Iceland...
and they don't give a shit about you, your diving, or even that you miss the point.

They have their act together... as close as can be... collectively.

Will the "Collective We" march on down the drain, or will the Collective We put our self-absorption aside,

and finally get the point?

Yen Cross's picture

 Ok, I jumped on your boat. You know as well as I know what Iceland is, and it's strategic importance/

 It's not common for someone to book a trip to Iceland. for a vacation/

  Although, Icelandic girls can be stubborn<

 Take a break Cabrearo/ You are out of control!

Yen Cross's picture

  You are just looking for conflict/  no humor Cabreado( Just a bull protecting his Cows!)

Yen Cross's picture

 You seem to be missing the point " Cabreado" I could give 2 shits

  Go live in Ice Hole for all I care/ Fuck you very much!

MrButtoMcFarty's picture

Will someone lock the drunk bitch in the basement please!


Cathartes Aura's picture


But I have visited Iceland...
and they don't give a shit about you, your diving, or even that you miss the point.

They have their act together... as close as can be... collectively.

which is the main point that always goes whooooossshh over the heads here - Iceland has less than half a million people sharing limited, beautiful space, with a long history that ties them together.  they're educated, community oriented - this means they can police themselves, and it's much harder for the sociopath narcissist gene to multiply and overtake the social fabric.

amrka can never be like this, never was in the first place.  from the very beginning of tales told, it's been justification of theft and death, via "God sez so" stories, and that my friends, is exactly how sociopathy thrives.

add in a little controlled media to stir the anger and dumb down the populace with sporting events, porn, and fudtm guaranteed to rot you from the inside out, voila!

tailor made bitchez.

francis_the_wonder_hamster's picture

Plenty of aquatic life in Iceland.  I'm planning a diving trip there next summer.

(go to Youtube and search for "Diving in Iceland" for some amazing videos).

11b40's picture

I thought he meant muff diving was espedcially good in Iceland.

e_goldstein's picture

Way off topic, but wtf is wrong with the new snorgtees girl's breasts?

She either has 3 like in total recall, or just one big one in the middle.


WesternFront's picture

You and your misdireckshuns E-man.  Oceania is not impresdt.  (Yes, my Newspeak is lacking)

WmMcK's picture

You mean that figuratively, of course.

Seize Mars's picture

You mean the one that says "I used to care but they have a pill for that now"?

Bang tidy, that

e_goldstein's picture

No, not her. There is a new blonde girl with a red t-shirt.

Seize Mars's picture

yeah, the jury is out. I'd hit it, but I don't want to meet her parents pr anything.

Seize Mars's picture

After careful analysis, I would say she has an ill-fitting brassiere. That, and I don't like the pencilled eyebrows. But other than those complaints, I'm in.


Seize Mars's picture

Wait a minute. She's knock-kneed.

Fuck it, I'm out.

Waterfallsparkles's picture

That is why the reduction in the Debt needs to fall squarely on the Banks.  It was all of the Money created to Bail them out that caused the explosion of the Debt in the US.

Tax them to pay back what was given to them from the creation of so much Debt.  Not taking away a Contributory benefit like Social Security.

cranky-old-geezer's picture



That is why the reduction in the Debt needs to fall squarely on the Banks.

Interesting idea, put writedowns on those with the least skin in the game, banks, they created money out of thin air, no investment of time, labor, resources, anything.

Billy Shears's picture

I don't usually buy bottled water but when I do I always make sure it is a product of Iceland...the girls are cute too.

HoaX's picture

Iceland is quite eager to join the EU by the way. The UK is eager to leave.

I know who I´ll be shorting and it´s not gonna be the Euro.

Yen Cross's picture

Iceland is torn, they want to see how CAD performs over the next 3 years. Iceland is inclined to join Canada and her commodity currency.

HoaX's picture

Iceland is part of the EEA and the Schengen area. They are part of the European Erasmus program (education). It´s also part of the Dublin convention on justice and home affairs.

17 June 2010, the EU granted official candidate status to Iceland by formally approving the opening of membership talks, this was AFTER the Icesave scandal in January 2010.

The screen process ended and formal negotiations began on 27 June 2011. Four chapters were opened: science and research; education and culture; public procurement; information society and media. The first two were immediately closed, a first in accession history. Iceland aimed to open half of the remaining chapters under the Polish presidency (the second half of 2011) and the other half under the following Danish presidency (first half of 2012).

2012-05-24: Proposal for a national referendum on discontinuing accession talks with the European Union rejected with 34 votes against and 25 in favor. 

Get your facts straight, they are firmly into the application process, and well after the Icesave debacle and subsequent overthrow of their government. A country like Iceland which is taken as an example here at least knows where its prosperity lies, and it is not with Canada, the US or the UK. It is firmly within the European framework.

Yen Cross's picture

Help me/ Please?  Endowments and Grants funded by "whom"? Your pal that loves junking me can surely answer that question?

   Casinoes/Power Ball Iceland?

HoaX's picture

Endowments and Grants funded by the European Union. And the same pall that is junking you is your pall junking me.

For the rest I refer you to my post further down.

p.s. Pretty pathetic you can only speak in populist rhetoric instead of coming with anything substantial.


HoaX's picture

Nice name innit? Jelly?

smiler03's picture

This article is more up-to-date than yours on EU accession feeling in Iceland (July 2012)


""As we get results from more primaries and the forming of lists of candidates EU membership for Iceland becomes more distant. If it would have been hard to get it through the current parliament it will be almost impossible at the next one."

Vast majority of Icelanders oppose EU membership and have according to every opinion poll published in Iceland for more than three years. The majority also does not want to adopt the euro and wants the EU application withdrwan."

HoaX's picture

Well, I stand corrected I guess.

Although I hope you do not mind me taking anything that comes from Britain when it pertains to the EU with a pinch of salt ;)

Yen Cross's picture

 I'll bet Iceland is really perplexed after "Carney left the BoC"?  Monkey Wrenches/

TheFourthStooge-ing's picture

Carney was never in Blue Oyster Cult, not even on cowbell.

CunnyFunt's picture

My ex's new/old man was comfortably equipped in Iceland with a grant for his research on artificial intelligence. Unfortunately for him, his grant wasn't renewed and he had to fuck off. From all accounts, Icelanders don't want non-Icelanders fucking with their gig.

Otherwise, Aziz should find some original content.

Yen Cross's picture

Thanks C/F. You are a Gentleman and Scholar. I thought I had reason to be pissed/ Buggar/Fuck off Icelanders!

  Cunny is right about the gig AZIZ! Quit playing with lost cultures on volcanic rocks!

collon88's picture

If GS is doing God's work then Iceland is doing Satan's work and must be stopped!