Although I appreciate the brilliant contribution Joseph Stiglitz has made to economics, I still find it cringeworthy whenever I hear someone thank the flexible Icelandic currency for things “being better than they could have been”.
It is sort of like thanking the arsonist for bringing a bucket of water to the fire he started himself.
Stiglitz, speaking in Copenhagen is still vary of the IMF’s involvement in Iceland. Its plans are likely to lead to increased unemployment. “The fund’s fuse is short, which means that if states don’t do what it proposes, then it will delay its actions. It is a negative signal and that is why many are now considering whether Icelanders should thank the IMF for stepping in one year ago and tell it that there is a balance in the system, there is no emergency situation and as a democratic state we need the citizens to get together and discuss further action. There are many things at stake but full employment is the most important.”
Stiglitz says that the huge budget cuts demanded by the IMF would lead to higher unemployment in Iceland. “They say that the cost of obtaining trust is to have large reserves, the cost of the reserves are high interest rates. The cost is equivalent to the budget cuts in health or education and Icelanders should ask themselves whether it is worth it.”
Related posts:
Bromley86
10 months ago
>The cost is equivalent to the budget cuts in health or education and Icelanders should ask themselves whether it is worth it.
And, yet again, wouldn’t it be nice if someone could flesh out the case for and against IMF involvement rather than making pretty useless statements like this?
Or maybe I’m meant to think for myself? Fair enough, but I’m not a FUCKING ECONOMICS PROFESSOR TELLING ICELAND TO KICK OUT THE IMF!
(Sorry, I’ve needed to get that off my chest for a few months
)
Anyway, a little selective quoting shows that the guy is clearly off his rocker:
“In an interview with The Irish Times , he said one of the most successful countries in dealing with the current global crisis was Iceland . . .”
although, to be fair, the rest of the quote is
“. . . because it hadn’t invested taxpayers’ money in its banks in the way Ireland is doing, and could devalue its currency.”
http://www.irishtimes.com/newspaper/finance/2009/1009/1224256255558.html
Dadi
10 months ago
Thanks for getting that off your chest Bromley86
hmmmm
10 months ago
“Broomley86 Anyway, a little selective quoting shows that the guy is clearly off his rocker”
but one can not beat the fact that unemployment is not that bad in Iceland given the extent of crisis.
Around 10% ( part of it are foreigners who have nothing to lose and icelanders who are not in hurry to take whatever job) is not that bad. One must compare to other nations which where involved (I say explicitly “were involved” not “have involved” ) in easy credit party.
By this I mean that an average citizen of many indebted countries has as much choice as well, Godwins’s right, an average german had under Hilter’s rule.
Bromley86
10 months ago
>but one can not beat the fact that unemployment is not that bad in Iceland given the extent of crisis.
This has certainly been the case. I’m not sure that I believe his point about the Icelandic government not bailing out the banks though. After all, the current news is that they’re not going to have to bail out the banks as much.
I’m likewise not convinced that Iceland has been handling the crisis in a manner that he would, from my glance at his bio, approve. i.e. (and here I must confess to not having a cast iron case) protecting the private wealth of fishing magnates at the public’s expense. Or not; perhaps it is a price worth paying to avoid disruption to an already stressed economy? But that is precisely the argument applies to support bailouts generally.
Dadi
10 months ago
It is true that the unemployment rate has not become as bad as it could have been.
But that only tells half the story. Most people I know have had to experience wage cuts, anywhere from 10-50%, depending on the situation. Meanwhile, inflation has heightened the cost of living and of course mortgages have gone through the roof.
The number of college students has also risen dramatically and they are not counted in unemployment statistics.
hmmmm
10 months ago
bailing out banks – I guess the government would like but has no FX for that. End of road.
as for fishing magnates, well. At some point they were forced to come back with FX. At least the news were such. Otherwise I do not think icelandic parties at power are that strong or even ready to try this major overhaul of distribution of national income. Commies are extinct spieces and let them stay such. After all the whole mess may turn out not that bad at the end of a day(a decade I’d say). No need to do more harm than is already done. State is not effective at managing resources, the USSR have proved that. State rule only works at especially tough periods and for a rather short time. Corruption is no less only that media’s mouse is closed so that no one knows the extent of it. Actually, this is what already happened in Iceland at some extent during the last decade. State dictate or oligarghs dictate – what’s the difference? For the people state dictate is somewhat more preferable by the way. It puts an end to oligarchs feud and makes rules clear. Jaja, I’ve already said too much.
D_Boone
10 months ago
In this situation a floating currency is a blessing re umemployment but that is not to say in other situations it does not have its own problems.
Based on other countries experiences I would get out from under IMF yoke ASAP… perhaps not immediately but don’t think they are a fairy godmother out “to help”. The history of their help is not that impressive.
hmmmm
10 months ago
well, and what situation Iceland has now?
The problem, the real problem is the virtual economy created on virtual money. Too many people where doing virtually worthless jobs for a number of years. At some point Reykjavik became a huge salesmen play yard (i.e. marketplace.) OK, everyone knows that.
The depreciation of króna is not a fall of króna. Compare dollar against euro exchange history. It is not that different from krona.
Actually, it is a blessing icelanders can now stop buying the latest gadgets.
Fundamentally, Iceland is facing a simple problem: population grew 2x in some forty years period.
Cod wars and energy brought prosperity decades ago but the fish stock is the same today as it was then. Energy production has increased but it is technically difficult to sell it.
All in all icelanders can not maintain the same living standard as before. It is not enough just to go a few miles into a sea any longer.
Most probably the answer is simple: Cod Wars period was unique, sort of golden age. One can not expect to maintain such a pace of growth indefinitely. The financial “miracle” of the last years just proved it.
Independence party started a privatization process thinking there are plenty of resources to divide and that they can be run more effectively by private parties. The issue is that those resources were accumulated over a period of time using a limited reserve of natural resources.
The economy did not reorganized into some magic high tech companies making money from other sources than energy and fish.
What is going to happen next is probably quite simple. A greater unequality, reduced pace of growth. Back to a normal live so to speak.