ruggedjackal46 said:Everyone was predicting total collapse, yet somehow they bounced back pretty well. And honestly, I don't see how things could have gone any better for the public if they had used their own money to bail out failing banks. Wouldn't that have been the ultimate belt-tightening?
Take the mortgage holders back then—overnight, people found themselves facing double the debt because property values plummeted... essentially. The government steps in just to prevent a massive wave of bankruptcies among citizens who took out loans. We shouldn't build this myth about Iceland... Their politicians are also quite "creative" when it comes to pulling money from pockets—and when that fails, they just devalue the currency and pose for photos again.
Where does the state even get the funds to stop an epic national catastrophe? They start with IMF emergency loans, but ultimately, they're forced to invent new taxes or hike existing ones—which, predictably, the citizens end up paying. Inflation was used as a tool to wipe out part of the debt and boost domestic exports, but on the flip side, it stripped away what the average person had built for themselves.
The UK compensated its citizens and turned its attention toward Iceland. Since those banks were private entities, the British authorities didn't really care. Citizens tried to block the debt repayment through a referendum, but the government eventually had to pass legislation ensuring the money went back to the Brits and other foreign investors—to everyone's mutual satisfaction. Not that the British are known for empathy, of course... They certainly aren't known for being bullied into letting competitors clear the market.
Debt forgiveness is like a chain reaction. You forgive it once, you have to forgive it for everyone—otherwise, you lose all credibility in the international markets. That's a luxury something like a member of the EU simply can't afford... there are too many sharks circling that market.
Irresponsible bankers need to face justice—there's no debate there. But part of the problem lies with the states themselves. They are the ones guaranteeing stability, securing the currency, regulating, incentivizing, and so on. The average citizen will always be the one getting squeezed, because they can. In the end, it all boils down to the same thing—it's not that the situation is bad, it's just that the system failed itself...