Monday, 20 August 2012
The IMF Admit Iceland Was Right. Bailouts And Austerity Were Wrong!
Bloomberg News
IMF Says Bailouts Iceland-Style Hold Lessons in Crisis Times
Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.
Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.“Iceland has made significant achievements since the crisis,” Daria V. Zakharova, IMF mission chief to the island, said in an interview. “We have a very positive outlook on growth, especially for this year and next year because it appears to us that the growth is broad based.”
Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy. The island’s subsequent decision to shield itself from a capital outflow by restricting currency movements allowed the government to ward off a speculative attack, cauterizing the economy’s hemorrhaging. That helped the authorities focus on supporting households and businesses.
“The fact that Iceland managed to preserve the social welfare system in the face of a very sizeable fiscal consolidation is one of the major achievements under the program and of the Icelandic government,” Zakharova said. The program benefited from “strong implementation, reflecting ownership on the part of the authorities,” she said.
Euro Aid
As of March this year, the IMF had program arrangements with 11 European countries, representing about 65 percent of its funds, according to its website. Governments inside the euro zone have struggled to comply with the austerity terms prescribed in joint aid packages provided by the IMF and the European Union, leading to revised terms and extended deadlines for nations such as Greece.At the same time, bond markets have reflected a lack of confidence in recovery programs, sending debt yields higher and adding to pressure on government finances. Countries inside the euro area or with pegged currencies such as Latvia have relied on wage cuts and reduced welfare services as a means toward delivering on bailout goals.
In Iceland, the krona’s 80 percent plunge against the euro offshore in 2008 helped turn a trade deficit into a surplus by the end of the same year. Unemployment, which jumped nine-fold between 2007 and 2010, eased to 4.8 percent in June from a peak of 9.3 percent two years ago.
Impressive
“Each program is different and responds to a different situation so one cannot compare them directly,” Zakharova said. “Of course, considering the depth of the crisis in late 2008, Iceland’s recovery has been impressive.”Iceland, which the IMF estimates was the world’s third- richest nation per capita in 2005 before slumping to rank 20th by 2010, ended its 33-month program in August last year. The $13 billion economy will expand 2.4 percent this year, the IMF said April 17. That compares with an estimated 0.3 percent contraction in the 17-member euro area.
Iceland’s growth “is driven by private consumption, investment has picked up strongly and even though, when you look at net exports, those have a negative contribution to growth, it is mainly because imports have been strong, reflecting strong consumption and an increase in income and the healthy expectations of households,” Zakharova said. “Still, exports have been increasing very strongly. Last year was a banner year for tourism. These are all really positive things.”
‘Key Challenge’
Iceland, which started EU membership talks in 2010 with euro-area membership an ultimate goal, is starting to question whether accession to the trade and currency bloc is the right way forward as the region’s debt crisis deepens. Thirty-nine of the Reykjavik-based parliament’s 63 lawmakers oppose continuing EU membership talks and may push to have the process shelved before elections next year, newspaper Morgunbladid said today.The island still needs to show it can unwind its capital controls successfully, Zakharova said. About $8 billion in offshore kronur are locked behind the restrictions. The central bank has said the plan to ease controls is likely to be completed by the end of 2015. The law allowing the government to maintain the controls expires next year, requiring a parliamentary extension. Former Economy Minister Arni Pall Arnason said in a September interview that Iceland has no plans to return to a free floating currency before entering the euro.
Krona Gains
The krona has gained about 15 percent against the euro since a March 28 low and was trading little changed at 147.27 per single currency as of 12 noon in Reykjavik today.“The lifting of the capital controls is a key challenge for Iceland and it’s not an easy task,” she said. At the same time, “the government has regained access to international capital markets; the cleaning up of the balance sheet of banks has been proceeding at good speed. So going forward it’s important that the gains are sustained and consolidated,” she said.
As the central bank prepares to ease capital controls, policy makers are also raising interest rates in part to protect the krona from any weakening that might ensue. The bank increased its benchmark rate a quarter or a percentage point on June 13, bringing it to 5.75 percent. It was the fifth interest- rate increase since August last year.
“Further monetary tightening is needed, over the next few quarters, in order for Iceland to get to the target,” Zakharova said. “But we’ve also seen that the central bank has made strong statements about a hawkish monetary policy stance, indicating that the monetary policy will be tightened over time. So we think that the stance is appropriate at this point.”
To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net
To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net
The bankers told us that no amount of suffering (for the Little People) was too great in order to make sure that the Bond Parasites got paid at 100 cents on the dollar. Iceland told the Bond Parasites they would get what was left over, after the people had been taken care of (by their own government).
The bankers told us that our governments could no longer afford the same education, health care and pension systems which our parents had taken for granted. Iceland told the bankers that what the country could no longer afford was to continue to be blood-sucked by theworst financial criminals in the history of our species. Now, after three-plus years of this absolute dichotomy in economic policymaking, a clear picture has emerged (despite the best efforts of the propaganda machine to hide the truth).
In typical fashion, the moment that the Corporate Media is forced to admit that it has been serially misinforming us for the past several years; the Revisionists are immediately deployed to rewrite history, as shown in this Bloomberg Businessweek excerpt:
...the island's approach to its rescue led to a "surprisingly" strong recovery, the International Monetary Fund's mission chief to the country said.http://blogbywiggy.blogspot.co.uk/2012/08/the-imf-admit-iceland-was-right.html
In fact, from the moment the Crash of '08 was orchestrated and our morally bankrupt governments began executing the plans of the bankers, I have written that the only rational strategy was to put People before Parasites. While I wouldn't expect national policymakers to take their cues from my writing, when I wrote out my economic prescriptions for our economies I didn't base my views on compassion, or simply "doing the right thing." Rather, I have consistently argued that it was a matter of simple arithmetic and the most-elementary principles of economics that "the Iceland approach" was the only strategy which could possibly succeed. When Plutarch wrote 2,000 years ago "an imbalance between rich and poor is the oldest and most fatal ailment of all Republics," he was not parroting socialist dogma (1,500 years before the birth of Socialism). Plutarch was simply expressing the First Principle of economics; something on which all of the modern capitalist economists who followed in his footsteps have based their own theories. When modern economists produce their own jargon, such as the Marginal Propensity to Consume; it is squarely based on the wisdom of Plutarch: that an economy will always be healthierwith its wealth in the hands of the poor and the Middle Class instead of being hoarded by rich misers (and gamblers). So when the Bloomberg Revisionists attempt to convince us that Iceland's strong (and real) economic recovery was a "surprise"; this could only be true if none of our governments, none of the bankers and none of the media's precious "experts" understood the most-elementary principles of arithmetic and economics. Is this the message the media wants to convey? What is even more disingenuous here is the congratulatory tone in this exercise in Revisionism, since nothing could be further from the truth. As I detailed in a four-part series one year ago, the campaign of "economic rape" perpetrated against the governments of Europe over the past two and half years (in particular) has been expressly designed to take away "the Iceland option" for Europe's other governments.One of the reasons for Iceland being able to escape the choke-hold of the Western banking cabal is that its economy (and its people) still retained enough residual prosperity to tough it out -- as the banking cabal tried to strangle Iceland's economy as retribution for rejecting their Debt Slavery.
Thus, austerity has been nothing less than a deliberate campaign to destroythese European economies so that the Slaves would be too economically weak to be able to sever their own choke-holds. Mission accomplished!
One can only assume that neither the Corporate Media nor their Banker Masters would have allowed this clear acknowledgment that Iceland was right and we were wrong to appear within its own pages, unless it felt secure in the knowledge that all the remaining Debt Slaves had been crippled beyond their capacity to ever escape this economic oppression.
Indeed, for evidence of this we need only look to Greece: the one other European nation where there had been "rumblings" (i.e. riots) aimed at toppling the Traitor Government that served the banking cabal. After two elections, the combination of fear and propaganda bullied the long-suffering Greek people into choosing another Traitor Government -- which had expressly pledged itself to reinforcing the bonds of economic slavery. When the Slavesvote for slavery, the Slave Masters can afford to gloat.
Here, the purpose of this Bloomberg propaganda was not to praise Iceland's government (when both the bankers and Corporate Media despise Iceland with all of their considerable malice). Rather, the goal of this disinformation was to manufacture a new Big Lie.
Instead of the Truth: that from Day 1 Iceland's approach was the only possible strategy which could have succeeded, while our own governments chose a strategy intended to fail; we get the Big Lie. Our Traitor Governments were acting honestly and honourably; and Iceland's success and our failure was yet another "surprise which no one could have predicted."
We saw precisely the same Revisionism following the Crash of '08 itself, where the mainstream media trotted out all their expert-shills to tell us they had been "surprised" by this economic event; while those within the precious metals sector had been predicting precisely such a cataclysm, in ever more-assertive terms, for several years.
The real message here for readers is that when an economic strategy of People before Parasites succeeds that there is nothing the least-bit "surprising" about this. As with all the remainder of the world around us, promoting the health of Parasites is only good for the Parasites themselves.
No comments:
Post a Comment