http://noir.bloomberg.com/apps/news?pid=20601109&sid=ab9qiwb6VDNg&pos=12 Some good points here about how it's better to let the banks fail and the shareholders and bondholders take the losses, just providing a baseline safety net for depositors below the insured amounts, rather than put an unlimited guarantee then taxing a population of ordinary people to bail out the rich. This is the first "real time" result of Keynesian bailouts vs classical liquidation of failed businesses and it looks like the liquidationists were right all along.
Oh, come on, GoC... Firstly, don't you think that the president of Iceland is just a tad biased in this? Did you expect him to say that "We did it all wrong in Iceland, while the Irish are doing the right thing"? He's a politician that's talking 'his book'. Secondly, the comparison between Iceland and Ireland is silly, because Ireland doesn't have the outlet that was available to Iceland, i.e. its own currency (which, incidentally, the guy mentioned). Iceland also wasn't part of a monetary union with all sort contagion risk implications this creates.
There are well known carry traders from the US who were directors of Icelandic banks... I wouldn't paint them all white.
As I understand Iceland used capital controls, a quite anti-free market measure, in order to make sure there wasn't a massive run on deposits and collapse of the money supply
Iceland has been a disasterous experiment in monetary policy. For years it floated double digit interest rates which spawned a financial industry that lived off the interest arbitrage. Ofcourse now the arbitrage is over there is no reason for those banks to be in business. Iceland has no reason to prop up its banks. Contrary to Iceland, Ireland DOES have a reason to prop up its banking industry. It's banks DO have a reason to stay in business. All this talk about letting banks fail is incredibly ignorant and will let a manageable financial crisis spiral out of control into a full blown depression if its actually followed up on.