They took the exact opposite course during the financial crisis and experts from the IMF and other Nobel laureates have credited that for their remarkable recovery. As our economy continues to flounder, I don't buy that this is something everyone should not at least be aware of.
>"They took the exact opposite course during the financial crisis"
They are a tiny country who nationalized their banks, stiffed creditors, implemented unnecessary austerity measures and devalued their currency. I'm not sure they're a model for US economic policy.
Obviously the circumstances are different, you wouldn't use this as a one-to-one model, but that doesn't mean there aren't things we can learn, and it certainly doesn't justify the scant media coverage.
Creditors were left to deal with the mess that they were complicit in creating while ordinary people who just wanted a house to live in were freed from crushing debt. Some limited austerity measures were put in place that didn't cut into core social spending. The people were taken care of while financiers were told to take a hike, and just as all the experts didn't predict the crash, none of them predicted Iceland's recovery. Maybe the big lesson here is that economists don't know what the fuck they're talking about, and there are other factors in play than neoclassical theory. That is why this hasn't received coverage, because it would lead to self-reflection that would make those in power uncomfortable.
There are no examples of a bank crisis in a country of the size of the US economy other than the one in 1929, and I guess nobody want to repeat that receipt. That is probably what a purer capitalist/liberalist would prescribe still.
Of larger nation than Iceland Norway and Sweden handled the bank crisis around 1990 by nationalizing the banks and adding to their capital reserve. The shareholders lost their money, but the banks were able to recover in not too many years.
The worst thing that can be done is a bailout. In that case the people that took unnecessary risks for their own short-term gain are rewarded, and everyone else have to pay.
That actually sounds like a much better policy than what was implemented in the US. Bailing out foreign creditors to private banks was simply a huge waste of money.
