So thousands of Icelanders had to struggle with fundamental change in their economic situation, loss of income, even loss of property, increased burden of loans, unemployment, and the nation as a whole also had to face -- which somehow we were fortunate to realize early on -- that the collapse of the banks was not just an economic or financial crisis, but also developed into a very profound political, social, and even judicial crisis.Read the rest at Business Insider (fairly long but worthwhile)
Whereas in many other countries, until recent months, there was a tendency to read this, through 2008, 2009 into 2010, primarily as an economic and financial challenge. And I think one of the reasons Iceland has come out of this crisis earlier and more effectively than anyone could have expected, even ourselves, is that early on, we approached this not just with economic and financial challenge, but also attempted to deal with the profound profound social, political, and even judicial challenges, which the collapse of the bank brought about.
And during those final months of 2008 and the early weeks of 2009, what we saw here in Iceland was a fundamental threat to the political and social stability of the nation. Iceland is one of the most stable, open, and secure democracies you can find anywhere in the world.
How the financial system could pose a fundamental threat to the political and democratic framework of Iceland illustrates the grave political and social responsibility which the market and the financial sector carries, because if a collapse in the financial sector can bring one of the most stable and secure democracies and political structures to his knees, as happened in Iceland, what could it do in countries that have less stable democratic and political history?
So this journey in the last three years has not only been difficult for ordinary people, families, homes, many companies, but it has also been a profound learning experience for the nation, not just economically, but as I said before, politically and socially as well.
Iceland's President Explains Why The World Needs To Rethink Its Addiction To Finance
Adam Taylor
(h/t Lambert Strether at Naked Capitalism)
There are many interesting observations. My favorite:
And you might also find it interesting that the collapse of the banks revealed to us a very interesting aspect of modern banking, which I think has been more or less overlooked in this discussion in Europe and in America in the last two or three years: the Icelandic banks, like all modern big banks in Europe and America and all the other parts of the world, are no longer banks in the old-fashioned way. They have become high-tech companies. High-ranked engineers, mathematicians, computer scientists, programmers and so on and so forth. And their success depends largely on how successful they are in hiring people with this education and capability, not necessarily those trained in business schools or finance, but in engineering, mathematics, computer science and so on.
And when the Icelandic banks collapsed, what we saw was that a great number of companies in these creative sectors, IT, high-tech, and all of those, who had the large growth potential in the previous years, but had not been able to realize it because they couldn’t get the people, due to the fact that the banks were buying up all the best engineers and mathematicians and computer scientists, suddenly had the pool of talent available to them. And within six months, all these people who came out of the banks with these qualifications had been hired. So since then you have seen a great growth period in the Icelandic IT sector, the high-tech sector, the manufacturing sector, because they could suddenly get the engineers, the mathematicians, the computer scientists.
So the lesson from this is: if you want your economy to excel in the 21st century, for the IT, information-based high-tech sectors, a big banking sector, even a very successful banking system, is bad news for your economy. You could even argue based on this that the bigger the banking sector is, the worse is the news for your economy, because their magnetic attraction of taking engineers and technically qualified people and computer scientists into the banking sector is due to high bonuses and higher salaries prevents these creative growth sectors from realizing their full potential.
We were not aware of this in the years leading up to the collapse of the banks, but once it happened, what we have seen since is an extraordinary interesting demonstration in what I have just described to you. And to me, it should urge people, both in Europe and in the United States to look at the prevailing orthodoxies of a big financial sector versus other parts of the 21st century economy, at least that’s my view. If you want to excel in the 21st century economy, it’s more important to give high priority to your creative sectors, and IT companies and high-tech companies, and not building up big banks, because if you need money you can always get it somewhere in the world in the globalized financial system. But if you lose the most valuable manpower in your creative sector, there is nothing you can do to repair that damage.
This was a very interesting lesson which in the last two years or so has become absolutely clear to us. And I think that within the U.S. and Europe, people should seriously examine what is the consequence of a high-tech, big, modern banking sector, because the banking sector today is a high-tech sector. Do you want to base your competitive advantage as a nation on that? Or do you want to do it on other companies that could become global in a relatively short time, as Facebook and Twitter and all these other companies, and Microsoft have proved. That is why you see all those companies in Iceland coming out with more growth, bigger profits, stronger marketing positions in the last two years than they have in the years prior to the collapse of the banking system.
8 comments:
Heresy
Actually, I think this is the first time I have heard a national leader speak honestly and frankly. It's usually just a suit giving a speech.
Tautology 1: If something exists, then it was created.
E.g. If your holding money, ask yourself this, where did it come from. Naturally we know it came from somewhere because your holding it. Your hands may not be the first to hold it, in fact many hands may have held it. The fact remains, that someone somewhere held it first. They received it from the Money Mint, but they did no work for it. We know this is true, because your holding the piece of money. Which we know must have been created, for how could you hold something that was never created?
You may not know exactly how it was created, but you know it's created. By some process you don't quite understand the money you hold was created. You know this process must exist, for how could you hold money that was never created?! This magical money creating process takes simple elements and creates desirable money. And you seek to understand this magical money process. One fact is true, that this money process takes abundant elements and creates rare tokens of money!
The trick, you see, is that for some reason you believe, that money you hold is in short supply. You are convinced that money doesn't grow on trees, in reality, however is that it basically does! For abundant elements are feed into the magical money creating machine. Abundant elements are not rare, they are plenty and many.
Next time they say "we are running out of money", ask yourself this; how can a machine that uses abundant elements somehow stop working? Then you may understand this little trick that has so many fooled.
Despite a few self-serving comments, I thought the remarks re G Brown's propaganda campaign seemed pretty reasonable:
"So I think if you look at the case objectively, there are strong indications that this was political maneuvering, especially by the Gordon Brown government, who was in a tight corner during those days in October, and simply decided that Iceland was small enough for them to go up against us -- in the same way that Margaret Thatcher went against Argentina over the Falklands -- instead of looking at the issue from a more responsible and long-term perspective."
This guy is delusional! He doesn't mention the risk of banks lending in foreign currencies in which they don't have access to the central bank.
While it is heartening to see he let banks fail and their shareholders lose out, it is sad he remains ignorant of why the banks failed. He blames the usual liberal suspects, greedy banks etc and is so eager to paint a political picture of punishing the rentiers that he is about to make his entire country a user of a foreign currency and doesn't realize that it won't punish the banks. It isn't liberal social goals that protected the public! It was their monopoly on their currency and willingness to use it. What a tragedy he can't understand.
"It isn't liberal social goals that protected the public! It was their monopoly on their currency and willingness to use it. What a tragedy he can't understand."
In my book, understanding that you have a monopoly on your currency and having a willingness to use it for public good and not let private banks dominate the money business IS a liberal social goal.
Understanding the financial & monetary system and using it to promote public interest is good governance regardless of political view, imo.
But, "a very successful banking system, is bad news for your economy."???????
Ignorant politicians and regulators asleep at the wheel ARE bad news for ALL economies. Markets NEVER work without vigourous regulation.
Credit where credit is due, but that said... why he wants to get inside the disaster that is the euro is beyond me...
Only thign that saved Iceland is because it had its own central bank. You see that awesome is to have the power to issue your own currency, a mini-nation of 300,000 could face powerful bankers from England because they can print their own money!
And he wants to give that up to crooks like the ones in the ECB!
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