Icelands brought down by deregulation

[Kevin_Kennedy]

Here is yet one more example in history where Deregulation caused a massive problem for a state.

There is no example of any "magic market" unfettered and making a state strong and healthy.

Please use common sense when you chose to back economic policy.

No more la la land ideas please.

I'd suggest you read "How Capitalism Saved America" by Thomas J. DiLorenzo.

 

[manu1959]

Global financial crisis overwhelms tiny Iceland | csmonitor.com


In recent years, Iceland embraced the world economy, integrating with (but not joining) the European Union, floating its tiny currency on the open market, and, in late 2002, deregulating its sleepy banks. The banks rapidly expanded overseas, buying English soccer clubs, offering high-interest Internet savings accounts to Dutch and British families, and foreign-currency mortgages to Icelanders.

“The whole world was suddenly open to us and this new generation of young people had taken over the banks and they looked like they had the know-how to deal with this new reality,” says the Rev. Karl Sigurbjornsson, bishop of Iceland’s state-sponsored Lutheran church. “Ordinary people like myself couldn’t understand what was really happening and when we asked questions we were told that we were just ignorant of the great new world of the free market.”

It was lack of sound regulations to keep the profiteering and shady dealings down that killed them.

this is shocking ... we need to hold senate hearings right now and pass regulations to stop all the icelands from governing themselves.....

 

[doeton]

And guess how Obama is going to save us? By using the same failed Keynesian economic theory that brought us here in the first place. But don't worry. When it fails, the Democrats will simply blame Bush (which is fine with me). And when market forces eventually take over and truly save America and the world, .

lol!

yeah, i can't wait till they bring back mining towns.

heard they had great prices at them mine owned stores.

 

[doeton]

I'd suggest you read "How Capitalism Saved America" by Thomas J. DiLorenzo.

"And just as he did in his last book, The Real Lincoln, DiLorenzo explodes numerous myths that have become conventional wisdom. How Capitalism Saved America reveals:

• How the introduction of a capitalist system saved the Pilgrims from starvation
• How the American Revolution was in large part a revolt against Britain’s stifling economic controls
• How the so-called robber barons actually improved the lives of millions of Americans by providing newer and better products at lower prices
• How the NewDeal made the Great Depression worse
• How deregulation got this country out of the energy crisis of the 1970s—and was not the cause of recent blackouts in California and the Northeast"

Lol!

Would you like fries with that brainwashing?

 

[doeton]

Artificially adjusting interest rates, setting a target of 1% to entice everyone down to the unemployed to borrow their entire life away on a mortgage they would never have been able to pay back.

And then there's the problem of inflation that comes with all of this "creative" banking. When rates go that low, new money that doesn't even EXIST, but on a balance sheet, is being added to the system. Prices go up, living expenses become hard to maintain, and debts don't get paid back.

Businesses don't increase wages with inflation they way you'd THINK they should, because they KNOW that in 5 or 10 years we're going to hit the bad end of a business cycle and spiral into deflation, which would make Dollars scarce and their higher payrolls unsustainable. They know this because it happens too often throughout history. Business cycles are happening more frequently now, with less boom time in between. You wouldn't raise your wages EITHER.

It's a recipe for disaster that's playing out before our eyes.

I completely agree that the FED screwed up by not putting the breaks on the housing bubble.

but now that the bubble burst i would think low interest rates are part of the solution.

seems to me it was more the bad credit checks that is causing the foreclosure problem...and apparently currently folks with bad credit are going to have a tough time with loans now so again the low interest rates wouldn't seem to be the problem now.

and as for deflation? sure folks aren't getting raises...but that's because there's little profits out...not cause companies fear deflation.

 

[manu1959]

I explained that in post #6. It's amazing how few people truly know the facts. That's by design.

how has the federal reserve system of banking caused an individual to be forced to go into debt and make bad business decissions....or a state government for that matter....or a federal government......

Loaning way too much funny money in relation to what's actually on deposit.

Artificially adjusting interest rates, setting a target of 1% to entice everyone down to the unemployed to borrow their entire life away on a mortgage they would never have been able to pay back.

That target rate of 1% is what made sub-prime loans possible. Banks wouldn't be offering sub-prime if rates had been reasonable.

And then there's the problem of inflation that comes with all of this "creative" banking. When rates go that low, new money that doesn't even EXIST, but on a balance sheet, is being added to the system. Prices go up, living expenses become hard to maintain, and debts don't get paid back.

Businesses don't increase wages with inflation they way you'd THINK they should, because they KNOW that in 5 or 10 years we're going to hit the bad end of a business cycle and spiral into deflation, which would make Dollars scarce and their higher payrolls unsustainable. They know this because it happens too often throughout history. Business cycles are happening more frequently now, with less boom time in between. You wouldn't raise your wages EITHER.

It's a recipe for disaster that's playing out before our eyes.

so you think the 10-1 ratio is too high.....you are aware the fed doesn't set the target that banks loan money to each other at .... the banks do .... the fed is simply a place for the banks to balance their ratio each night ....

 

[rayboyusmc]

Please quit posting issues like this that don't jive with right wing ideas of free market, deregulation, rule by the rich and etc.

Only a commie pinko would post this stuff.

 

[Paulie]

how has the federal reserve system of banking caused an individual to be forced to go into debt and make bad business decissions....or a state government for that matter....or a federal government......

Loaning way too much funny money in relation to what's actually on deposit.

Artificially adjusting interest rates, setting a target of 1% to entice everyone down to the unemployed to borrow their entire life away on a mortgage they would never have been able to pay back.

That target rate of 1% is what made sub-prime loans possible. Banks wouldn't be offering sub-prime if rates had been reasonable.

And then there's the problem of inflation that comes with all of this "creative" banking. When rates go that low, new money that doesn't even EXIST, but on a balance sheet, is being added to the system. Prices go up, living expenses become hard to maintain, and debts don't get paid back.

Businesses don't increase wages with inflation they way you'd THINK they should, because they KNOW that in 5 or 10 years we're going to hit the bad end of a business cycle and spiral into deflation, which would make Dollars scarce and their higher payrolls unsustainable. They know this because it happens too often throughout history. Business cycles are happening more frequently now, with less boom time in between. You wouldn't raise your wages EITHER.

It's a recipe for disaster that's playing out before our eyes.

so you think the 10-1 ratio is too high.....you are aware the fed doesn't set the target that banks loan money to each other at .... the banks do .... the fed is simply a place for the banks to balance their ratio each night ....

This is incorrect. The fed sets the target and works tediously on the open market trading treasuries and swapping debt to maintain the rate as close as possible to their target. Right now, the target is a "range" of 0% -.5%, which has been holding steady at around .1 - .2% the last couple months.

When you hear about the fed raising or lowering the fed funds target, that's exactly what they're doing. They're adjusting their open market policy to maintain that rate. That's the prime purpose of the Federal Open Market Committee, which Geithner was a member of.

 

[Paulie]

Manu, read this. It's a pretty good explanation in laymans' terms.

Open market operations - Wikipedia, the free encyclopedia

 

[Kevin_Kennedy]

I'd suggest you read "How Capitalism Saved America" by Thomas J. DiLorenzo.

"And just as he did in his last book, The Real Lincoln, DiLorenzo explodes numerous myths that have become conventional wisdom. How Capitalism Saved America reveals:

• How the introduction of a capitalist system saved the Pilgrims from starvation
• How the American Revolution was in large part a revolt against Britain’s stifling economic controls
• How the so-called robber barons actually improved the lives of millions of Americans by providing newer and better products at lower prices
• How the NewDeal made the Great Depression worse
• How deregulation got this country out of the energy crisis of the 1970s—and was not the cause of recent blackouts in California and the Northeast"

Lol!

Would you like fries with that brainwashing?

Well that's all true so what brainwashing were you referring to?

 

[GHook93]

Iceland - Wikipedia, the free encyclopedia

The had State owned banks and in 2000 they thought they would join the trend of private banks with deregulation as a gudeline for successs.

In less than a decade this stable wealthy country is bankrupt.


Deregulation killed them.

Get it right! CDOs killed them like it killed everyone! CDOs combined mortgages of all types and placed a A++ rating on them. The buyers, in this case Iceland, thought no risk only reward investment. There is no saying that government owned or highly regulated banks in Iceland would have not invested heavily in CDOs. Shit, Sweden and Norway invested big time in CDOs and they are both very socialist!

 

[manu1959]

Loaning way too much funny money in relation to what's actually on deposit.

Artificially adjusting interest rates, setting a target of 1% to entice everyone down to the unemployed to borrow their entire life away on a mortgage they would never have been able to pay back.

That target rate of 1% is what made sub-prime loans possible. Banks wouldn't be offering sub-prime if rates had been reasonable.

And then there's the problem of inflation that comes with all of this "creative" banking. When rates go that low, new money that doesn't even EXIST, but on a balance sheet, is being added to the system. Prices go up, living expenses become hard to maintain, and debts don't get paid back.

Businesses don't increase wages with inflation they way you'd THINK they should, because they KNOW that in 5 or 10 years we're going to hit the bad end of a business cycle and spiral into deflation, which would make Dollars scarce and their higher payrolls unsustainable. They know this because it happens too often throughout history. Business cycles are happening more frequently now, with less boom time in between. You wouldn't raise your wages EITHER.

It's a recipe for disaster that's playing out before our eyes.

so you think the 10-1 ratio is too high.....you are aware the fed doesn't set the target that banks loan money to each other at .... the banks do .... the fed is simply a place for the banks to balance their ratio each night ....

This is incorrect. The fed sets the target and works tediously on the open market trading treasuries and swapping debt to maintain the rate as close as possible to their target. Right now, the target is a "range" of 0% -.5%, which has been holding steady at around .1 - .2% the last couple months.

When you hear about the fed raising or lowering the fed funds target, that's exactly what they're doing. They're adjusting their open market policy to maintain that rate. That's the prime purpose of the Federal Open Market Committee, which Geithner was a member of.

as you say ...they set a target but not the actual rate that money is traded at ....

the rate is set by the bank that buys or sells the difference in the overnight balance sheet ..... the feds can increase or decrease the supply of money to try to influence the rate ......

 

[GHook93]

Could a solution be for Iceland to sell the country to America! Let's buy! 51st state of the Union!

 

[editec]

Could a solution be for Iceland to sell the country to America! Let's buy! 51st state of the Union!

Probably a hard sale for those us currently in a blizzard.

Let us know if Costa Rica goes on the market though, would ya?

 

[GHook93]

Could a solution be for Iceland to sell the country to America! Let's buy! 51st state of the Union!

Probably a hard sale for those us currently in a blizzard.

Let us know if Costa Rica goes on the market though, would ya?

But they have the cream I always hear about on the radio and the fish have to be very tasty!

 

[manu1959]

Could a solution be for Iceland to sell the country to America! Let's buy! 51st state of the Union!

well we do need to get to 57 states and they are the worlds leader in geo thermal energy.....

 

[manu1959]

Could a solution be for Iceland to sell the country to America! Let's buy! 51st state of the Union!

oops.....

 

[Paulie]

as you say ...they set a target but not the actual rate that money is traded at ....

Manu, you originally said:

you are aware the fed doesn't set the target that banks loan money to each other at .... the banks do .... the fed is simply a place for the banks to balance their ratio each night ....

I corrected your exact statement. The Fed DOES set the target. They work the open market pretty tediously to keep the rate at or close to their target.

All I did was correct an incorrect statement you made. Nothing more, nothing less. I realize banks ultimately establish the rate, but it certainly isn't free, because the Fed manipulates the entire process. So are the banks REALLY establishing the rate? No. How could they, when the Fed ultimately manipulates the process?

THAT'S the problem with it, and that's where I blame them Fed for our ultimate problems. We have people trying to blame a free market that was never free to begin with.

By the way, I was incorrect about the target range. It's 0-.25, not 0-.5

 

[Toro]

Over the long-term, credit that is generally priced by the market is the most efficient manner of channeling credit to the economy. However, financial systems are inherently unstable and thus need to be strongly regulated, particularly regarding capital ratios based upon the assets and liabilities of a bank.

Iceland deregulated its financial system, experienced a tremendous boom, then collapsed. This is actually quite common, and has played out over centuries.

http://www.publicpolicy.umd.edu/news/This_Time_Is_Different_04_16_2008 REISSUE.pdf

This paper offers a “panoramic” analysis of the history of financial crises dating
from England’s fourteenth-century default to the current United States sub-prime financial
crisis. Our study is based on a new dataset that spans all regions. It incorporates a number
of important credit episodes seldom covered in the literature, including for example,
defaults and restructurings in India and China. As the first paper employing this data, our
aim is to illustrate some of the broad insights that can be gleaned from such a sweeping
historical database. We find that serial default is a nearly universal phenomenon as
countries struggle to transform themselves from emerging markets to advanced economies.
Major default episodes are typically spaced some years (or decades) apart, creating an
illusion that “this time is different” among policymakers and investors. A recent example
of the “this time is different” syndrome is the false belief that domestic debt is a novel
feature of the modern financial landscape. We also confirm that crises frequently emanate
from the financial centers with transmission through interest rate shocks and commodity
price collapses. Thus, the recent US sub-prime financial crisis is hardly unique. Our data
also documents other crises that often accompany default: including inflation, exchange
rate crashes, banking crises, and currency debasements.

One must remember that bank crisis have been routine throughout American and European economic history, re-occurring every generation or two. Thus, Iceland is no different, other than it was utterly spectacular.

 

[garyd]

Another country damaged by US mortage laws and regulations whoppee.