DMTB, yes, I meant to write 'Iceland', but I wrote 'Greece' by mistake. Thankyou for getting the context. Clearly, Martingoul is not crazy...at least not on this evidence.
Yeah, sorry, I suppose I should have been able to tell that Greece was out of place in that passage where you talk about Iceland. However, it wasn't clear, so I assumed you actually meant Greece.
OK, so back to the point...I believe all my data about Iceland is correct. I got the infor from reading article about the Iceland Economy during the past year...including the CIA country informatiion (which is not current)...Articles were in bloomberg and other credible publications. S&P upgrade was in Reuters and AP. I beleve the Iceland data is correct and shows that Iceland has turned the corner....I think they are now making a mistake in trying to raise a new tax to please the IMF but it is a financial transaction tax....so it won't make much difference in Iceland...where there are now so few bank financial transactions that can be taxed. Iceland defaulted in the sense that it did put its taxpayers behind its banks and it failed to make good on the foreign investment in 'Icesave' accounts that were made good by U.K. and Netherlands. It let its banks go into bankruptcy and receivership and the assets are likely to pay most of what is owed to U.K. and Netherlands. Their economy took an immediate hit and now they have moved back to basics, focusing on the industries that work in Iceland and the Icelanders who work in those industries. This is much better than what is offered by the Troika to Greece...already three years of depression and plunging GDP, and with the new torture in exchange for more debt plan, the Greek GDP will continue to crash and lead to the breakdown of civil society in Greece. The point of this all to Jueco, is that debt is problem, but if you deal with it honestly and practically instead of thowing new debt against bad debt, you can grow out of it after you write it down to manageable levels....debt of itself, need not be an obstacle to growth. The issue is classic 'work out'...first you have to admit that you lost money and your lender lost money, and you can never get it back, then you have to see what is left that can produce any income and protect it, act so not lose more, and begin to grow again.
Well, given that Greece is part of the Eurozone and its banks are part of the Eurosystem, there's clean "Iceland solution" for Greece. As the always excellent John Hempton explains here, http://brontecapital.blogspot.com/2011/09/models-for-greek-sovereign-default.html, it's sort of a rock and hard place type of deal.
That's the thing about having loaned money that can't be paid back and that has no collateral that can be used to make a recovery. At some point you have to admit there is no hope with debt restructuring; you have to admit that the money is lost, and you have to write it off...no matter what you want to do. 'A rock and a hard place' is just a cliche that describes the situation where you have to make the best of bad choices for your self. One choice lets the Greeks take the loss and put it behind them with a way to move forward, and it makes the Northern Euro banks take huge write downs. Another choice keeps squeezing the Greek people with no real plan for recovery, a kind of debt slavery, and alows the Northern banks to pretend the money does not need to be written off. What you choose depends on where you sit. In any case the money is gone, everyone needs to deal with that and try to move on with a growth strategy; otherwise it will just get worse.
I think we agree that massive debt write offs is an important step to ensure faster and better world wide economic recovery.
It is what it is...some people didn't have anything to lose, those who did, need to start again. The alternative is to build sand castles against the tide. What is 'biflation'...if you are going to say that it is both...then you have destroyed the meaning of either.
I'm thinking more of the people who invested the money and won't get it back. A whole generation losing their pension. Biflation is the explanation of price rises and price falls at the same time. In terms of absolutes it will be inflationary imo, at least globally. I guess you have to define what you refer to as inflation or deflation. A lot of people believe it is the money supply and whether it grows or falls. However it is price rises or falls and aggregate prices. I think it will be inflationary but as a result of a reduction of real demand. So in other words there will be a supply shock that will be attempted to be resolved by pump priming.