Taxpayers in Europe (and the United States) who have been terrorized since 2008 by government officials warning about economic armageddon, catastrophe, and pestilence should look to tiny Iceland for a taste of how little there is to fear when the experts can’t save the people.
Christine Lagarde, managing director of the International Monetary Fund, recently branded Iceland’s economic performance “impressive.” In the last few years the small island in the north Atlantic has managed to shrink its deficit, reduce unemployment, and allow its economy to grow.
Meanwhile, on mainland Europe, there is hardly any economic growth to be seen, and countries that pledged to make necessary austerity reforms have almost certainly failed to do so.
Government growth, fiscal activism, and national resentment are the norm. Officials from the eurozone have been trying to help heavily-indebted nations like Greece, Portugal, and Italy avoid banking-system collapse and exit from the single currency. Were they to examine Iceland’s example they might find that temporary financial collapse and monetary sovereignty provide a better roadmap to economic recovery than bailouts backed up by unpopular and unenforceable “austerity” conditions.
Iceland, like the rest of Europe, was faced with an almost unprecedented economic situation in 2008. Iceland’s central bank tried to rescue some of the country’s largest banks, bankrupting itself in the process. Iceland’s largest banks heldalmost 10 percent of Iceland’s GDP in assets (much of it foreign) in 2008. The central bank was forced to attempt the rescue after agreeing to guarantee future bailouts in 2001. With the central bank out of commission and a crippled financial sector, Iceland’s GDP took a nosedive.
Read the rest of the article here: Reason.com