the economy.

[Balti]

the economy might be on the up but peoples disposable income is heading in the other direction

 

[york away to this!]

very cautiously optimistic here. After looking like another precipice at the end of summer last year for a few months it has been gradually rising since the calendar year turned. Money is coming back in to the markets, funds and investors are coming out of the woodwork...

fingers well and truly crossed and it can all change in a second if Spain or someone goes pop but...

 

[Mikeegrini]

Should we compare this 'success' with that of Iceland? A nation at the very eye of the financial maelstrom expected to be doomed for decades yet by taking a very different approach to our lot and the EU has returned unexpected GDP figures.

(Reuters) - Iceland's economy expanded in the first quarter at its fastest pace since its near-meltdown, powered by a surge in exports, tourism and domestic consumption.

Gross domestic product (GDP) grew 2.4 percent quarter-on-quarter in the first three months of the year to put annual economic growth at 4.5 percent in the period, the highest since the first quarter of 2008, data from the statistics office showed on Friday.

"It shows that the economy is growing rather rapidly, at least in an international comparison, at the moment," Islandsbanki Chief Economist Ingolfur Bender said.

"The increase is broad-based, driven by consumption, investment and exports."

Growth for the fourth quarter of 2011 was 1.9 percent on the quarter and 2.7 percent on the year.

The recovery has gathered momentum more quickly than expected after the small nation became a byword for the excesses of the liquidity boom which preceded the 2008 meltdown.

Iceland's Stabilized Economy Is A Surprising Success Story
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Credit: Iceland, downtown Reykjavik, elevated view, Getty

You may have heard about Iceland’s toppling economy back in 2008. As one of the hardest-hit countries at the time, Iceland’s heavily criticized method to escape veritable economic demise actually did the trick.

Faced with the possibility of financial failure, Iceland had to think on its feet. Instead of bailing out banks USA-style, the country forgave mortgage debt for the population – and completely started over from square one.

A country with a small population of roughly 320,000 citizens, Iceland‘s entire banking structure “systemically failed” in the early days of the 2008 recession. Despite the fact that Iceland is still on the road to recovery, the country ranks high as a politically and economically stable nation. Their success over the last few years has been largely under-reported, and the story behind it is quite fascinating.

A Little Bit of Morality Goes A Long Way

Let’s face it: Icelanders are tough. They are entirely isolated, living in frozen tundra, perpetually enduring less-than-optimal weather patterns. While they are surrounded by epic natural beauty, these people aren’t spoiled; they’re tenacious.

Instead of allowing the criminals responsible for bank fraud to run free as the years passed by, Iceland thought it might be wise to actually indict bankers who committed serious financial crimes that contributed to the collapse. By paying off loans for consumers, forgiving homeowner debt (up to 110% of the property value), and throwing the offenders in prison, Iceland was able to bounce back. Now, its economy is “recovered” and is growing faster than both the US and European economies.

When Iceland’s President Olafur Ragnar Grimmson was asked whether or not other countries – Europe in particular – would succeed with Iceland’s “let the banks fail” policy, he stated the following:

“Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail out banks is a theory that you allow bankers enjoy for their own profit, their success, and then let ordinary people bear their failure through taxes and austerity. 
People in enlightened democracies are not going to accept that in the long run.”

Grimmson’s “famous” reply to the controversial question, “What is the reason for Iceland’s recovery?” is most remarkable.

“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.”

Picking Up the Pieces On the Road to Recovery

Of course, though, everything isn’t all rosy. Many Icelanders have two or three jobs to sustain themselves and their families post-2008, and a sudden spike in taxes – an inevitable result of letting the banks fail – made the burden even harder to bear.

Though unemployment is down (it’s less than 5% of the population), you could say that “Iceland is a victim of its own success.” Very high standards of living and 60-70 hour work weeks create a bit of a pinch in the pockets. Difficult challenges lie ahead, but whichever way you look at it, Iceland did avert a seemingly incurable catastrophe. The point is that Iceland was criticized for allowing the banks to fail – and we now know that the disparaging remarks from scathing critics were too quick to judge.

Since 2008, Iceland has added jobs to its tourism and green energy sectors. In fact, according to the Icelandic Tourism Board, foreign visitors increased last year by 15.9% – and travel now accounts for 5.9% of GDP.

However unorthodox in its method, Iceland’s “let it fail” policy resulted in jubilation. We can’t seek perfection in the years after a global financial collapse, but we can acknowledge nations who persevered with integrity.

Also on Forbes: What Makes Iceland One Of The World’s Happiest Countries?

 

[BoyBlue_1985]

Isn't 0.3% of $2.4 trillion a lot more than 4% of $12 billion?

 

[guinnessdaze]

In the South where I live the housing market is on the up, plenty of new mortgages being lent for first time buyers apparently, not sure about your neck of the woods though.

 

[Josh Blue]

*facepalm*

 

[Bill]

In the South where I live the housing market is on the up, plenty of new mortgages being lent for first time buyers apparently, not sure about your neck of the woods though.

it must be the same as more people are buying new carpets for those homes.

 

[Josh Blue]

They have just closed 12 london fire stations down and sold the fire engines to themselves for £2, they will know be renting them out. Making a profit.

What you are experiencing is called the start of the summer ...

 

[Never Mind The Pollocks]

They have just closed 12 london fire stations down and sold the fire engines to themselves for £2, they will know be renting them out. Making a profit.

What the actual fuck? £2!?

 

[BoyBlue_1985]

They have just closed 12 london fire stations down and sold the fire engines to themselves for £2, they will know be renting them out. Making a profit.

What the actual fuck? £2!?

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