Two people I trust suggested that this post is a little hot headed and that I should revise or tone down.
The email however is suddenly running very supportive.
The purpose of the post is and was to make sure everyone knows just how important and nasty financial crises are.
If I have offended people doing that I am sorry, but the crisis is the central fact in what will be modern Icelandic history...
The central policy question raised by the Asian crisis was 'why did the market deal such harsh punishment for so minor economic crimes?'
This will be the question asked by Icelandic people too. And it is a question that should be asked of all those who subscribe to the dumb doctrine that is Austrian economics...
In Asia they ran large current account deficits caused mostly by good excess investment... it still crashed (and recovered).
The stakes here are very high. Iceland is a nasty case but there is no 'Icelandic exceptionalism' and there will be no 'Australian exceptionalism' if we stuff up either. Australia is warmer than Iceland and that is a darn good thing. But it is a small thing.
So, please take my hot headedness as it is intended, which is to outline the stakes...
There is a long history of financial crises, there is a long history of the aftermath. I made a semi-flippant comment about part of the aftermath. It has sent my email and the comments wild. I have gone from 1 regular Icelandic visitor who knew my views in detail because he asked to hundreds of Icelandic visitors. The comment was about financial crisis and prostitution.
I know of no crisis where pretty women have not prostituted themselves out of desperation or for advantage. There are people who have emailed me who can confirm this first hand for Argentina, both as clients and as good Catholic girls turned to distasteful work. Do not think for a moment that I am pleased by these stories...
The journalist whose story of the Russian crisis was one of pretty women aspiring to be dollar whores said it as a matter of fact...
This is not new.
I have now had so many emails and comments that tell me that Icelandic women would rather shoot me and eat me than prostitute themselves that I am sick of it. It may be true but it is not an option open to most Icelandic people.
Financial crises are pernicious affairs. And if there is something about Icelandic exceptionalism I do not see it in the market place. Take your Icelandic exceptionalism and stick it with what is left of your Krona.
I do not mean to be tough. I think that the US should bail out Iceland. Its a democracy full of fundamentally decent people and they deserve much better than what is about to befall them. If the goal of US policy is to make the world safe for democracy fixing Iceland is a cheap shot.
But the US is not going to bail out Iceland. And life is going to be very tough indeed. Tough enough to undo all Iceland's excessively high opinion of itself.
For that I am sorry.
Australia also has a high opinion of itself, and an unsustainable current account deficit. Not as unsustainable as Iceland but bad. I would not like it at all if what is about to befall Iceland befell my home town.
PS. My view is not fundamentally different from this view in the British press...
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