Iceland Cometh and Teacheth
August 24th, 2011
With the U.S. jobless rate at 9.1% and GDP slithering along at about 1%, President Obama is probably jealous of…Iceland! Yes, after an utter collapse in 2008, Iceland has thawed, and the economy is moving forward not backward. In June, Iceland managed to raise $1 billion by selling bonds. GDP is growing at nearing a 3% pace. Budget cutbacks did not hurl the economy back to the 12th century or into a multi-generational Great Depression.
There are lessons here for the European PIIGS, which have been dithering over bank bailouts. Iceland didn’t bail out bank creditors. They got walloped along with everyone else. Sure, Iceland became a pariah. But it didn’t last very long. As Machiavelli taught, when you’ve got bad news: deliver it all at once. In June Iceland had to offer 4.875% to attract bond buyers. Today Greece must pay 18.50%.
Icelanders are tough people. They eat rams testicles. Which I hear are much tastier than the putrefied shark cubes.