- James I. Clark III
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Deep Freeze of an Unregulated Economy
Iceland’s economic collapse, the result of a reckless government and a lack of financial regulation, is an object lesson to Americans who fear increased — but necessary – markets oversight.
Icelandic debt is 10 times the country’s GDP! In the United States, our debt would have to be close to $100 trillion to put us in the same position. Icelandic banks were deregulated during the mid-1990s, after which the economy was run like a giant hedge fund; following the economic collapse, citizens lost most of their savings and are saddled with debt and mortgages they can’t afford. Inflation and unemployment are skyrocketing. Is it any surprise that the neo-liberal government whose policies put Iceland into a financial vise fell following protests by infuriated citizens?
So vast is their debt, Iceland’s insolvent banks may be forced to declare bankruptcy a second time. When their own economic crises left the United States, Britain and the European Central Bank unable to bail out Iceland, the country turned to Russia and the International Monetary Fund in hopes of a financial rescue…maybe a miracle.
The interim government, a coalition of the Left-Green Party and Social Democrats, wants to rewrite Iceland’s constitution. The goal is to “enshrine national ownership of the country’s natural resources” and to “open a new chapter in public participation in shaping the structure of the government”. This marks a 180-degree change from the free-wheeling policies of the past where market regulation was non-existent.
Ever since American credit markets froze last fall, it’s become clear that a well-regulated economy equals a healthier one.