The reason is simple—if you are even remotely interested in stimulating an economy, Rule #1 is the maximum amount of the stimulus must go to the lowest income groups. And why is this Rule #1? Because, if you pump the money into the bottom, that money will show up as economic activity at every level on its seemingly inevitable rise to the top. If you pump the money into the top, it barely gets used once. Most likely the rich guy will put his new-found wealth into a hedge fund where it will spend its days trading financial instruments that have no practical usefulness whatsoever. That's why the expression is "A rising tide lifts all boats" and NOT "A rising yacht lifts all tides." Since the IMF redefined its mission as protecting foreign bondholders above all else—certainly above the well-being of the society they were "adjusting"—they have been in violation of Rule #1. Whether this was out of pure malice or utter madness has been one my life's most persistently annoying questions.
So now we see that the IMF—the EVIL IMF—the insane IMF—has been forced to admit that Iceland got it right. When you look at little Iceland, it's kind of easy to blow off their accomplishments post 2008. They prosecuted the criminals who had taken over their banking business and applied their economic cure to the lower and middle-income folks who had been placed in dire straights by those thieves. It was the blindingly obvious solution to their problems—so what's the big deal? The big deal is that Iceland is still the only example of this enlightened behavior.
IMF Says Bailouts Iceland-Style Hold Lessons in Crisis TimesBy Omar R. Valdimarsson on August 13, 2012
Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.
Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.
“Iceland has made significant achievements since the crisis,” Daria V. Zakharova, IMF mission chief to the island, said in an interview. “We have a very positive outlook on growth, especially for this year and next year because it appears to us that the growth is broad based.”
Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy. The island’s subsequent decision to shield itself from a capital outflow by restricting currency movements allowed the government to ward off a speculative attack, cauterizing the economy’s hemorrhaging. That helped the authorities focus on supporting households and businesses.
“The fact that Iceland managed to preserve the social welfare system in the face of a very sizeable fiscal consolidation is one of the major achievements under the program and of the Icelandic government,” Zakharova said. The program benefited from “strong implementation, reflecting ownership on the part of the authorities,” she said.
As of March this year, the IMF had program arrangements with 11 European countries, representing about 65 percent of its funds, according to its website. Governments inside the euro zone have struggled to comply with the austerity terms prescribed in joint aid packages provided by the IMF and the European Union, leading to revised terms and extended deadlines for nations such as Greece.
At the same time, bond markets have reflected a lack of confidence in recovery programs, sending debt yields higher and adding to pressure on government finances. Countries inside the euro area or with pegged currencies such as Latvia have relied on wage cuts and reduced welfare services as a means toward delivering on bailout goals.
In Iceland, the krona’s 80 percent plunge against the euro offshore in 2008 helped turn a trade deficit into a surplus by the end of the same year. Unemployment, which jumped nine-fold between 2007 and 2010, eased to 4.8 percent in June from a peak of 9.3 percent two years ago.
“Each program is different and responds to a different situation so one cannot compare them directly,” Zakharova said. “Of course, considering the depth of the crisis in late 2008, Iceland’s recovery has been impressive.”
Iceland, which the IMF estimates was the world’s third- richest nation per capita in 2005 before slumping to rank 20th by 2010, ended its 33-month program in August last year. The $13 billion economy will expand 2.4 percent this year, the IMF said April 17. That compares with an estimated 0.3 percent contraction in the 17-member euro area.
Iceland’s growth “is driven by private consumption, investment has picked up strongly and even though, when you look at net exports, those have a negative contribution to growth, it is mainly because imports have been strong, reflecting strong consumption and an increase in income and the healthy expectations of households,” Zakharova said. “Still, exports have been increasing very strongly. Last year was a banner year for tourism. These are all really positive things.”
Iceland, which started EU membership talks in 2010 with euro-area membership an ultimate goal, is starting to question whether accession to the trade and currency bloc is the right way forward as the region’s debt crisis deepens. Thirty-nine of the Reykjavik-based parliament’s 63 lawmakers oppose continuing EU membership talks and may push to have the process shelved before elections next year, newspaper Morgunbladid said today.
The island still needs to show it can unwind its capital controls successfully, Zakharova said. About $8 billion in offshore kronur are locked behind the restrictions. The central bank has said the plan to ease controls is likely to be completed by the end of 2015. The law allowing the government to maintain the controls expires next year, requiring a parliamentary extension. Former Economy Minister Arni Pall Arnason said in a September interview that Iceland has no plans to return to a free floating currency before entering the euro. more
Iceland Was Right, We Were Wrong: The IMFBy Jeff Nielson 08/15/12
VANCOUVER (Silver Gold Bull) -- For approximately three years, our governments, the banking cabal, and the Corporate Media have assured us that they knew the appropriate approach for fixing the economies that they had previously crippled with their own mismanagement. We were told that the key was to stomp on the Little People with "austerity" in order to continue making full interest payments to the Bond Parasites -- at any/all costs.
Now in what may be the greatest economic "mea culpa" in history, we have the media admitting that this government/banking/propaganda-machine troika has been wrong all along. They have been forced to acknowledge that Iceland's approach to economic triage was the correct approach right from the beginning.
What was Iceland's approach? To do the exact opposite of everything the bankers running our own economies told us to do. The bankers (naturally) told us that we needed to bail out the criminal Big Banks, at taxpayer expense (they were Too Big To Fail). Iceland gave the banksters nothing.
The bankers told us that no amount of suffering (for the Little People) was too great in order to make sure that the Bond Parasites got paid at 100 cents on the dollar. Iceland told the Bond Parasites they would get what was left over, after the people had been taken care of (by their own government).
The bankers told us that our governments could no longer afford the same education, health care and pension systems which our parents had taken for granted. Iceland told the bankers that what the country could no longer afford was to continue to be blood-sucked by the worst financial criminals in the history of our species. Now, after three-plus years of this absolute dichotomy in economic policymaking, a clear picture has emerged (despite the best efforts of the propaganda machine to hide the truth). more
Planting the Seeds in the Minds of Americans Sharing How Iceland Defeated the BankersBy The Watchdog | August 15, 2012
The world is facing a Banker holocaust if this problem is not dealt with. There have been rumors of the economy completely collapsing in the fall before the November election. Many people who are politicians or operatives for the financial oligarchs plan on bringing order out of chaos when the economy collapses. Their plan is the people will accept the banker solution of more draconian controls by the very people who engineered the demise of the economy.
The Bankers forced Congress in the fall of 2008 for a banker bailout called TARP. It was also getting the government to sign onto over 1000 quadrillion derivative banker debts the American people never consented to, nor do they owe. Congress was threatened with martial law if they did not pass the TARP bill. Ever since the repeal of the Glass Steagle Act, the markets have went hog wild with phony financial instruments called credit default swaps. This is out right criminal activity that no one in high places have been arrested or been held accountable who are responsible for the economic turmoil.
While the government is saying there will be a complete economic collapse. Before the very people who engineer this collapse behind the scenes so they can ride in on a white horse posing as the saviors. We have to step up and get really loud. The alternative media has had much success exposing these people who have been responsible for the poor economy. Now it is the time we start planting the seeds in the minds of Americans about how the country Iceland dealt with the bankers who committed crimes against the people. The bankers are not invincible and can be defeated.
The American people need to know about what really happened in Iceland. They need to know when the people have the will to take action; we can see how the economy rebounded after they threw out the bankers and took back control of their monetary policy. The people of Iceland did not let bygones by bygones with the bankers. They went far beyond just throwing them out.
When the people of Iceland were confronted with economic chaos, they did not sit idly by and allow the money junkies to loot the nation. They went after those who were responsible. Not only did they go after the bankers storming the banks in anger. The people of Iceland rooted out the agents of the bankers in government positions. They fired the government in bed of the bankers and placed a new government in that is anti banker who represents the people and not the banking cartel that almost brought the nation to near ruin.
The American people need to know that the little country of Iceland drove out the money changers if there is the will in the people to act and do what it takes. The money junkies are not untouchable; they can be defeated and removed from the country. Once we expose the banking fraud here in the United States and show how the people of Iceland took care of the banker problem they were confronted with, then we can start to drive then banking cartel out of America if we have the will to do what it takes.
Iceland has done more then just kick out the bankers out, they are not only going after the bankers who are now fugitives who committed fraud against the people. Bankers and government officials who have enabled the banking fraud have been arrested and now sitting in jail. These banks are not too big to fail. Just because these oligarchs are wealthy with ill gotten gain on the backs of the people. It does not mean they are too big to jail either. Iceland is still going after the people responsible to arrest, try and imprisoned those who tried to commit fraud in Iceland.
When this economy collapses, we have to point the finger at those who done it. We have to expose this before the collapse happens. We have to show who is behind it. Out of the chaos, the oligarchs will try to pose as the savior when they engineered the implosion by design so they can use the crisis exploiting the desperation of the people to set up a banking dictatorship as the solution which is far worse.
There is a reason why the mainstream corporate media does not cover what happened in Iceland too much. It is because they do not want to give the American people any ideas on how to take back their country from the banking cartel that has our nation in an economic stranglehold. That is why we have to do it because if we show who engineered the collapse by design using derivative market. Then we can go after the Bankster gangsters before they try to set up a draconian economic system as their solution that is far worse then we are living under now. more