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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ThirdWorldDude's picture

No financial advice required from a paper pusher,

fuck you very much!

TrulyStupid's picture

Iceland needs to lever up their economy:

1. Accuse Greenland (Denmark) of harboring weapons of mass destruction and impounding Icelandic fishing boats.

2. Deliver an ultimatum that can't possibly be complied with

3. Hire an international mercenary army (Israeli?) and bribe some NYC banksters to deliver American military aid and Canadian anti-ecoterrorism expertise

4. Club all the baby seals in Greenlands in the name of fighting terrorism and imposing economic scantions on a non existent threat


Presto: a growth economy

Yen Cross's picture

 You are smart T/S. I'm just trying to help the guy ballance his books/ I have zero interest in Iceland. I want them to grow and be self sustaining/

Yes_Questions's picture



Iceland don't play that!

HoaX's picture

Simple solution would be:

Stop bailing banksters out, instead use the money to guarantee saver (not speculators!) deposits. Then if a bank fails let it fall and pay the savers their deposits out of the fund so the general economy doesn´t go to shambles.

And prosecute of course.

Would have cost everyone a lot less.


Yen Cross's picture

I'll be sure and return the favor. Quit gripping about saving, and buy some XAU, dipshit!

  Payback is more than a bitch/

HoaX's picture

Hehe, you´re a funny guy.

I´m not the one downvoting you, as much as you seem to think so.

Most debt is held by the finance sector by the way. Let´s have them pull an Iceland, just renege on all their accumulated debt and sod the rest, while they keep their bonuses. Afterwards when they "miraculously" rise up out of the ashes we can herald them as the new heroes of how capitalism should work.

If you herald Iceland for this why not extend it to the likes of Lehmans, AIG, MFGlobal, etc. etc.?

Or do you agree we need some rules and regulations to at least be able to jail the fuckers?



Angus McHugepenis's picture

Iceland can pull my Johnson.

I did what Iceland did 12 years ago on a personal level. The only difference between me and Iceland is that I haven't gone back into the ponzi/matrix. Believe me, Iceland will be recaptured by the banksters and they will suffer for going off the reservation.

Yen Cross's picture

 At least those down votes were valid. When you least expect it, I'll pimp slap you like the lying Monkey you are!

  People on Z/H don't much care for imposters. You just screwed yourself out of any trust, from anyone/ Oh, when you change your Z/H handle, it's already been handled!

Yen Cross's picture

Have you checked your inboxes lately? HoaX

HoaX's picture

You got issues dude.

And I´m sure my junk folder will be filling up rapidly.

steelrules's picture

Iceland: Soon to be labeled an axis of evil terrorist nation, joining others like Iran, N korea & Venezuela.

Hapa's picture

Unfortunately, Iceland is still enmeshed in the mainline banking world of fiat money and usury.  Personally, I think the system needs to fail so we can get rid of the central banking cartel and its stranglehold of debt enslavement.  If we just tweak things as in Iceland, it's getting back to business as usual, and that is not the point!

Yen Cross's picture

What is your point? I thought that was a darn good post! I was getting ready to go for a run, and you got me glued back to my laptop.

Yen Cross's picture

Hoax you realize that you just incinerated your ace card? Trust is something I don't play games with>

Antifaschistische's picture

If Iceland were a city in the US, it would be the 58th largest city....right behind Aurora Colorado.

Yen Cross's picture

 Iceland, a giant (no FLY ZONE)...  Iceland ; Hi Bypass Turbofan repair Capital of the World!

Yen Cross's picture

Iceland/ Long Geo Thermal ass holes!

Yen Cross's picture

 The Vikings would be ashamed of Iceland/ At least the Vikings (pillaged , raped, plundered) their way across the Atlantic. To a New World!

Yen Cross's picture

 Ice land is melting as we speak/ I'm going to make it a "pet project"...

 Get that runway extended for spring travel. You are already mapped and loaded!   I'll probably be private though/

Manthong's picture

Well, you know what they say in Iceland..

"Á nógu lengi tímalínu lifun fyrir alla niður í núll."

HoaX's picture

Or in this case: "eftir okkur, syndaflóð"

Joe A's picture

Olli Rehn, the EU commissioner for economy, said the other day that the debt crisis is Europe is over. He did not say which debt crisis. I guess he meant the debt crisis for the banks because with the various EU financial instruments, the banks will be bailed out and the bill goes to the people. Perpetual indebtness as a policy tool. A way forward to take money from the northern countries and burn it on the bottomless pits in the garlic belt. In the end, everybody in Europe will be equally poor. Next, political 'union', a bunch of unelected burocrats and technocrats in Brussels who will decide what you can do, smoke, think, etc. Sounds familiar?

falak pema's picture

No what he refers to, is the Sovereign debt crisis in EU; the visible portion of the financial crisis Iceberg. His thesis is the ECB and ESM plays now give the Club Med sovereigns enough back stops to cool the speculation and bring down the spread spike; thus allowing the can-kicking to streeeeetch out the debt pain over a decade or more.

That is the CONVENTIONAL GS-CB theory of can-kicking and fiat cooking unlimited.

What it does NOT address is the towering inferno of PRIVATE banking debt that needs REAL growth to pay-off its mega piles of incestuous intra-bank derivative bets; all based on a never ending growth scenario. 

They, the Oligarchy cabal,  can't resist true deleveraging pain in recession n depression, as the leverage of their banks, shadow banking included, is 30/1 today. We are like a junked economy, body-builded on mega steroid pump thanks to these shills and their mad hubris. Watch out for muscle going to fat! 

Nobody can hide when that dam bursts as it will. Its the private banks that store private wealth, create public misery and their whole criminal sleight of hand is leading the world to tsunami land. 

We are all on that ship. 

Joe A's picture

My point exactly. Countries have debts at the banks and financial institutions. The latter get bailed out. The bailout that Greece receives is to pay off the banks, not to bail out the people. They people need to pay off the bailouts and in the meanwhile need to pay for the reforms. What the EU ensures is that the people of Europe are on the hook of the banks and the financial institutions.

HoaX's picture

This is indeed utterly frustrating.

It´s also why I am in favor of measures like a Financial Transaction tax and heavy taxation on bankster bonuses (or just set a limit to them).

Measures the EU is proposing but which that great UK keeps on vetoing, wonder who they are trying to protect.

falak pema's picture

Iceland is olde "greenland" and greenland is olde "iceland"; good sleight of hand practised by the Knarr sailing horned pagans to keep the Saxons from visiting their Viking domains; decoy strategy initiated by the intrepid Lords of the Norse in early medieval period. 

So the people of Iceland grew up in splendid isolation and their only contribution to world forum was an international chess match of Boris Spassky vs Bobby Fischer fame in 1972.

Having been bitten by the subsequent "fiat jitterbug" during the Ronnie-Thatcher free-for-all rage n age, they got sucked into the derivatives maelstorm; like Professor Lindenbrock, Axel Harry and Hans, into the mighty volcano crater, looking for the center of the Earth in Jules Verne's "industrial modern age thrilla" in Reykjavik. 

"Descend, bold traveler, into the crater of the jökull of Snæfell, which the shadow of Scartaris touches (lit: tastes) before the Kalends of July, and you will attain the centre of the earth. I did it. Arne Saknussemm."

Jumping holy that was what the Alchemist Saknussemm had concocted to fool the world, just like Lady Blythe and GS squid team during the WS derivative age. What a towering inferno that  has bequeathed to all of us! 

Going down is easy if you are a mad alchemist, coming back from that voyage safe and sound is the feat if you stay sane of spirit; then as today!

Professor Lindenbrock did it then, like the people of Iceland in today's age have shown the way. 

There must be a moral to this spell binding story! 

Svendblaaskaeg's picture

I just luv happy endings!

Lessons learned: dont fuck with Da vikings, dont fuck with Erik the red's genes

I'm sooo proud of my Icelandic brothers, I would love to set sail and join you, but I'm would prolly lose my precious PM's (again)


Svendblaaskaeg's picture

Iceland's President to banksters: I have only ice for you

Radical Marijuana's picture

Iceland's solutions only worked there because the banksters' usual organized crime tricks could not work there as well as in most other places.

Iceland has a relatively small and homogeneous population. It was therefore difficult for the banksters to send in their usual goons, like the CIA, et alia. I believe that they tried, but the people noticed, because those operatives stood out like sore thumbs.  It was also difficult for the banksters to fund some faction, to provide them with enough money and weapons to start a civil war, that would then need international "humanitarian" intervention to bomb the shit out of Iceland.

Iceland was a relatively small place, and so, the banksters' solution has been to have the mass media deliberately ignore that bad example, as much as possible. The admission of Iceland into the European Union is the apparent Trojan Horse solution that the bankters appear to be successfully advancing.

The Icelandic solution will not work in any bigger and more diverse country, where the typical organized crime operations of the international banksters, (with the help of the countries that those banksters already almost totally dominate) will easily be able to succeed in destroying any emerging opposition to those banksters. The banksters are collectively a group of trillionaire mass murderers, who almost always prevail, by hook or by crook.

Iceland was a nice counter-example, but not practical anywhere else. Almost everywhere else, the banksters will pump funding into some factions that will destroy that country from within, and/or, then have excuses to destroy that country from outside, at the same time.

toomanyfakeconservatives's picture

Don't count the U.S. out just yet. Countless Americans thirst for justice, and with little left to lose, honor, not money will motivate them to do the right thing...



Radical Marijuana's picture

Well, toomanyfakecons, although I find Wilcock a very entertaining public speaker, with lots of interesting things to say, and, as well, I would say the same thing about Ben Fulford, I believe that the "Drake" story is bullshit.  No only do I think that Drake is spouting bullshit, I also think that his basic theory is impossible to believe.  After the development of weapons of mass destruction, both war, and revolution, have become insane. There is no coherent theory about how to fight a war with weapons of mass destruction, and there is no coherent theory of how to have a revolution inside a country with an abundance of weapons of mass destruction.

Unfortunately, the basic problem is that science and technology have made some people trillions of times more powerful, but apparently not the slightest bit wiser, but rather even more insane than before. Although I am in favour of a Second American Revolution, that would have to primarily be an intellectual revolution, for which I see no signs that that is remotely possible! The USA is being actively destroyed. I do not believe it can cure itself of its runaway social insanities.

Anything that triggered what "Drake" is alleging to actually happen would only be the beginning of triggering the collapse into chaos, that appears to be inevitably happening. There should be a deep paradigm shift in militarism, which implies a deep paradigm shift in revolution. The fundamental concepts of the murder system and the death controls need to be radically reworked, so that the necessry purposes could be achieved through a different paradigm. ... Of course, those hopes appear to be nothing but vainglorious fantasies, given the runaway reality of huge lies controlled the USA more and more, and thereby driving it INSANE.

Of course, there may well emerge more creativities, of the most astonishing kinds, in the future. However, that will be matched by greater destruction than ever before too! In my opinion, all of human history so far has just been the long ride up the first big hill of the roller coaster ride we are now on ... All the bumps in history, so far, have been nothing but little jolts on that ride up.  We have no idea how wild that ride will get, as we finally reach the turning point, and start going down, until we go up again, then down again ...

As long as the overall population and level of human activities continue to increase, then we are still on the basic ride up, which has been ride we have been on for the last 10,000 years, at least. The USA is set to double its population, yet again, adding something like one hundred million more people from outside, as well as some other groups doubling, (while some others are not even replacing their numbers.)  There are not the slightest signs, that I am aware of, that the American system is going to balance itself out in the foreseeable future. Rather, everything indicates wilder and wilder imbalances ... At some point, things will likely get bad enough that the total population will stop growing, along with the overall level of human activities.

The only alternatives are for there to be better death and debt controls, in the combined money/murder systems. Those can NOT be based on the goofy idealism promoted by Wilcock, or this guy "Drake" that I believe is tricking Wilcock.  The same applies to Fulford, who also has been advancing similar ideas, for about the same amount of time, if not a little longer.

The problem is that endless exponential growth of the quantity of people, and their overall level of activities, is absolutely impossible. By definition, the only thing that can stop that is some kind of death controls. Right now, the whole established system achieves those through the maximum possible deceits, which evolved through the history of militarism, through the Neolithic style of civilization, that spread out and conquered the whole world.

Iceland is actually another classic little example of the basic overall problem:  Earth is a spaceship, and little Lifeboat. The ability of human beings to face those fundamental facts appears to not exist, since everything that actually gets done is directed by those people who were the best at being dishonest, and backing that up with violence.

A Second American Revolution would have to be way, way more profound than the goofy reversion to old-fashioned ideals that guys like "Drake" profer.  As I said, I believe that Wilcocks has been tricked. I also think that IF you believe in such a facile set of solutions, then you have also been tricking yourself.

The deeper problem is that we must have a better murder system, doing better death controls, and nothing less is enough. That problem is profoundly deep because the established system is built on the foundation where those who were the best at running the real systems were also the best at lying about what they were doing. The most encompassing double-bind paradox, Catch 22 situation, is the old one Plato asked, about who would guard the guardians. There is an irreducible paradox of enforcement. So far, only those who were the best at being dishonest, and backing that up with violence, were able to become the guardians, and to enforce their rule of law.

A revolution attempts to substitute a new ruling class for the previous one. However, the deeper problem continues ... If, and only if, enough American were able to have a saner public debate about their money/murder system, and the ways that they were going to have death controls back up their debt controls, then we MIGHT be turning towards some stabilization of that system. However, that kind of saner public debate is laughable, to anyone who has a macabre sense of humour, since the REAL money/murder systems in the USA are obviously based on a set of such HUGE LIES, which are such runaway social insanities, that there are no reasonable grounds to expect any greater social sanity to be possible, before psychotic social breakdowns take us through transformations which are impossible to predict, and impossible to know the outcomes of ...

I like to think that the same basic ideas are valid now, as well as then, however, what is true both now, and probably then too, are that the world is and will be controlled by the paradoxical triumph of the best liars tricking other people. There are very few signs that enough Americans are able to understand the basic ideas that they should. Instead, the whole American system is based on impossible ideals, that backfire and make the opposite happen in the real world.

Meanwhile, we may also be looking at a series of natural megadisasters, which pre-empt the current runaway social storms, or man-made disasters we are headed towards. Remember, little Iceland is sitting on a geologically active area! Who knows what the real future could become ... Personally, I believe that civilization will be going crazy, at the same time as nature goes nuts, because they are correlated and interconnected in various ways.

onebir's picture

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

Qs: could the highly indebted (mainly developed) countries devalue enough against less indebted (mainly less developed) countries to get the same stimulus? How would eg China feel about/react to a big haircut on their T bills etc?

smacker's picture

Although banks in the West are notionally private corporations, they are - and have been for a very long time - deeply in bed with the political elites enjoying a mutual love-fest. A back-scratching relationship exists whereby the banks operate as instruments of political economic policy (to ramp up or slow down the economy depending on the election cycle). In return, when they wreck the economy thru criminal behaviour, the bosses get bailouts not jail time. This is corporatism, plain and simple. The taxpayer/saver/workforce end up paying the price of this political/bankster collusion.

newengland's picture

Agreed, and this:

The shadow world government Triateral Commission and Commission on Foreign Relations wants slaves, not citizens, and it is a very grave offense against humanity that the Republic of the USA has been captured by the old whore monarchist money power, the Bank of England and its pretty pet, the privately owned Federal Reserve Board.

They are hateful warmongers and they hate the Republic - and use ambitious shallow Democrat and fake 'Republican' hierarchy to advance their central bankster hateful warmongering enslaving agenda.

Corporatism: the unity of biggest banks, biggest government -  and any big religion that will bow down to it.

smacker's picture

I know at least one informed person who has claimed for a long time that "Mervyn 'King' of Inflation" (BoE Governor) is on the payroll of Moscow. And contrary to popular belief, most English communists of the last century went to Oxbridge, like Merv did. Make of that what you will........

Freewheelin Franklin's picture

The real Icelandic success story happened around 950 AD and lasted over 300 years.

tuku2400's picture

it's much more difficult if you are strapped to someone else's currency, no potential to devalue and walk



Yellowhoard's picture

Just spitballing here, but what would happen if the government, instead of handing out trillions of dollars to cronies, gave every American $100,000 of debt forgiveness?

The credit could only be used to pay down existing debt.

Tom G's picture

And those who do not have any debt? They don't get anything for actually being responsible and refusing to play the government+banksters' games?

Brilliant. Moral hazard. See if I keep living responsibly after a kick in the nuts like that.

Yellowhoard's picture

I agree with you. However, savers are being punished now with inflation and zero interest rates.

Theoretically, if households became solvent again, a great deal of ancillary issues would be resolved. That is, instead of the Fed buying mortgage securities, individuals would take greater equity. Interest rates could then be allowed to float naturally to a market rate and allow the savers to resume living on interest income.

bugs_'s picture

"may indict".  says it all.

jeff314's picture

not a lot of jews in their administration...

Tom G's picture

I don't understand. The individuals who had a high level of personal debt were given a bailout? "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"

But Iceland went after those who were responsible for the economic catastrophe?

I agree the banks are hugely at fault, but what about the myopic and shallow individuals that voluntarily take on massive amounts of debt, beyond that which they are able to afford? They get the bailouts? And this is cheered on?

You know who lost in Iceland's fairy tale recovery? The responsible individuals who had no debt. Those who refused to play the game. But they aren't mentioned in the article. F*** the banks, and all that, but if we're just going to bail out some other irresponsible party, I fail to see how that makes everything okay.

indio007's picture

Maybe you should find out what "fraud in the inducement" is?

daccord's picture

The heard always follows the path of least resistance, who wants hard work when you`re offered easy streets of cheap credit illuminated by shinny new things. Sign here, here and initial here..