Posted on 03/15/2017 5:10:13 PM PDT by Lorianne
It looks set to be a week packed with big financial milestones. In the US, the Federal Reserve will raise interest rates, putting the country on a path towards getting back to a normal price for money. In the Netherlands, a tense election may deal the fragile eurozone another blow. In this country, Theresa May could finally trigger Article 50, starting the process of taking the UK out of the European Union.
The most significant event, however, as is so often the case, may well be something that hardly anyone is paying attention to. On Sunday, Iceland ended capital controls, finally returning its economy to normal after a catastrophic banking collapse back in 2008 and 2009.
Why does that matter? Because Iceland was the one country that defied the global consensus and did not bail out its bankers. True, there was shock to the system. But it was relatively short, and once the pain was dealt with, the country has bounced back stronger than ever.
(Excerpt) Read more at telegraph.co.uk ...
It works great if you are a small island, and all your depositors are thousands of miles away across the frigid Atlantic. They might be mad as hell, but what can they do?
America used to let banks go bust all the time, it wasn’t the end of the world, and the nation only grew and got stronger.
Then bankers figured out how create a cartel over the money supply, manipulate interest rates, and how to get other people, or the government, to bail them out.
Oh, for a minute I thought they were talking about ice near a river.
Bingo - look at the 1920-1921 depression as an example.
In those days, there were thousands of tiny banks, and they were highly local. When a few of them went bust, some people lost their savings, but everyone carried on as best they could. This worked since the country was growing at a rapid rate.
Today, if one of the giant banks went bust, it would be catastrophic. All the others would go to, and everyone and every company would lose all their money. Millions of businesses would not have the cash to meet payroll, and would have to close.
That is why they bailed them out. They may be stupid, but they are not that stupid.
Make them lend to folks who can’t pay it back. Then see what happens.
The banks should have been broken up.
And Who/What allowed banks to become Too Big To Fail?
All of America is now their hostage
AMEN!!!!!!!
Why are bankers, economists, and weathermen always immune from consequences?
Where would the money go?
Bipartisan. The big banks were given the tools to wipe out their competitors (small honest banks) by the 1999 repeal of Glass-Steagall.
It does appear that fragmenting the big banks would reduce the damage when they die.
The money would cease to exist. General Motors had $10 billion in cash in a checking account at Citibank, but there is no more Citibank, so the money has vanished. It was just a ledger entry at Citibank.
I would argue that there is an odd feature in Iceland’s economic recovery, which you cannot find in a normal country. Over the past five years, they’ve maximized the tourist potential to something way beyond the goals of a decade ago. 1.7 million tourists in 2016, and that was 40-percent over the 2015 results. I was one of their ‘guests’.
You go and look at hotels in June, July and August...they are pretty well maxed out. You need to plan trips at least six months in advance.
They’ve reached to roughly 2-percent on unemployment (fall 2016 numbers). The Keflavik Airport is talking about possibly bringing in foreign workers for the summer months because there just isn’t anyone left to hire for a growing jobs market. This summer, they will open a COSTCO in Reykjavik. Go around the outskirts of Reykjavik and look at apartment construction.
Provided no volcanoes erupt, they’ve got a trend that can’t be beat now.
give me a break.
$10 billion in a checking account?
That is not how it is done.
The big corp’s structure their accounts a lot differently than that.
Well, I worked in the wholesale department of a large bank for 29 years. I have glossed over some of the technicalities, admittedly, but if you want to hold cash to make payments, you have little choice but to use a bank.
“America used to let banks go bust all the time, it wasn’t the end of the world,”
That worked fine until 1930-33, when 30% of all American banks failed, the money supply contracted by 30%, and the Great Depression ensued.
The cascading collapse of the American banking system was the source of the Great Depression, as described in Friedman and Schwartz’s A Monetary History of the United States. Ben Bernanke was a student of theirs, and the Fed’s decision to flood the banking system with liquidity in reaction to 2008 comes from their conclusions in that book.
More likely they used money market accounts- but as you may remember the Lehman collapse caused money markets to “break the buck” for only the second time in history. It was that, rather than Lehman’s failure per se, that put fear in the Fed that events were heading into a vicious spiral that they might not be able to halt.
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