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Neil Macdonald: The 'monarchs of money' and the war on savers


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Here is an excellent piece from Neil Macdonald and in video form.

Its kind of sad and scary at the same time that a few unelected people behind closed doors probably hold more power than our elected officials.

Neil Macdonald: The 'monarchs of money' and the war on savers

Power Shift: First in a series on the rise of the central bankers and the global imposition of cheap credit

Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations.

These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.

They are the world's central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert.

The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do.

In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.

Who are the world's central bankers?

The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air.

There is an economic term for this: quantitative easing. More colloquially, it's called printing money.

Since the great economic meltdown in 2008, these central bankers have probably saved the world's economy from collapse, and dragged it into the unknown at the same time.

The amounts they have created are so vast as to be almost incomprehensible — trillions of dollars in pounds and euros, among other currencies.

At the end of 2012, the balance sheets of the world's largest central banks, those of the G20 nations and the eurozone, including Sweden and Switzerland, totalled $17.4 trillion US, according to Bank of Canada calculations from publicly available data.

That is nearly a quarter of global GDP, and slightly more than double the $8.5 trillion these same institutions were holding at the end of 2007, before the financial crisis hit.

Stock markets have risen on this tide of cheap money. So has real estate. So, arguably, has everything else.

But there are two big concerns with what this new central banker elite has done.

One is that no one really understands the consequences of pumping such vast amounts of money into the world economy. It's already distorted the prices of certain assets, and some fear hyperinflation or market crashes are inevitable (the subject of tomorrow's column).

The other is that it's caused a massive shift in wealth, from savers to borrowers, and is taking money out of the pockets of almost everyone approaching or at retirement age.

A war on savings

Probably the most painful of the consequences of quantitative easing has been borne by the elderly.

Most of that generation grew up believing that if you save and exercise prudence that you will earn at least a modest return on your hard-earned money to keep you comfortable in your old age, perhaps along with a pension.

But the money-printing orgy of the last five years looks to have shot that notion to smithereens.

Very deliberately, the central bankers have punished savers, pushing interest rates so low that any truly safe investment — and older people are always advised to play it safe — yields a negative return when inflation is factored in.

British pensioners Judy White and her husband Alan, at their home in Teddington, south of London: 'I now have 50 per cent less.' (CBC )

The policy has savaged pension and savings returns worldwide, but particularly in Britain, a nation of savers and pensioners.

There is more money in British pension funds than in the rest of Europe combined, and now that money is just sitting, "dead," as some call it, not working for its owners.

Ask Judy White, a retiree in her late 60s who lives in Teddington, south of London, with her husband, Alan.

This year, the Bank of England shattered her retirement. Her pension benefit was effectively slashed by half.

"I don't understand what quantitative easing is, except that it's printing money," she says. "But I do understand that I now have 50 per cent less.

"What they have done is take money from people who have been really careful all their lives."

On the backs of the virtuous

Actually, by the Bank of England's own reckoning, the £375 billion of quantitative easing it has carried out since 2008 has cost British savers and pensioners about £70 billion, roughly $100 billion. (At the same time, the richest 10 per cent of British households saw the value of their assets increase over the same period, the bank reported.)

That cost to the elderly is largely because pension payouts in the U.K. are pegged to the yields on government bonds, and quantitative easing has forced those yields down to almost nothing.

Speaking for the Bank of England, Paul Fisher acknowledges that the bank has created a paradox: It does want people to save and be prudent — just not right now.

"We try," he says, "to get people to do things now to get out of this mess, which in the long run we prefer not to do."

In other words, might we please have some more of the wild consumer spending and borrowing that helped get us all into this situation, at least for a while?

The plain fact, though, is that central bank- and government-imposed solutions to disasters caused by irresponsible, greedy, foolish behaviour are almost always carried out on the backs of the virtuous.

So it was with the bank rescues in 2008, and so it is with quantitative easing.

As Ros Altmann, a longtime pension manager and director of the London School of Economics, puts it, quantitative easing has amounted to a "monumental social experiment" — a large-scale transfer of wealth from older people to younger people.

"Anybody who was a saver and has got some accumulated savings will have had a reduction in their income," she says.

While "anyone who had a big debt, particularly mortgage debts, would have had improvement in their income because their interest payments have gone down."

As stupid as it might sound, older people everywhere would probably be better off if they'd abandoned prudence and borrowed more.

That is obviously not what the central bankers or our political leaders want. But that's the situation they've created.

What's the alternative?

This transfer from savers to borrowers has also been taking place here in the U.S. and in Canada, to varying degrees.

Some U.S. pension funds are in danger of default, at least partially because of these artificially low interest rates, and Canadian pension funds that are heavily invested in safer debt have been injured, too.

In an interview in his Ottawa office, Bank of Canada governor Mark Carney defends quantitative easing elsewhere, and his own low-interest rate policy, though he does acknowledge that it has been hard on pensioners and savers.

Like all central bankers, he argues the (impossible to prove) negative: There have been consequences, yes, but if we hadn't done this, things would be far, far worse.

As for carrying out these solutions on the backs of the virtuous: "I don't see a world where the virtuous are rewarded if we suffered a second Depression," he says. "These are the stakes."

Carney would prefer not to talk about the enormous power central bankers have gained since 2008, saying only: "We have a tremendous responsibility … because of a series of mistakes that were made in the private sector and the public sector."

As Canada has performed better than most Western nations, Carney has not ordered any new money printing.

But he has kept interest rates down, and that has fed the real estate booms over the last few years in Vancouver, Toronto, Calgary and elsewhere.

He scoffs at the suggestion that "the party" will end at some point. "I am not sure we are having a party right now," he says. "It doesn't feel like a party."

And, in fact, he has repeatedly expressed concern at the huge debt levels Canadians are accruing, at least partly because of his low-rate policies.

But surely he understands the anger of an older person watching their savings being eroded, I ask him.

Carney smiles grimly. That question is clearly a sore point. He gets a lot of mail on the topic.

Canadians, he says, must understand that the alternative is massive unemployment and thousands of businesses going under, and "my experience with Canadians is that they tend to think about their neighbours and their children and more broadly … they care a little bit more than just about themselves."

Asked whether central bankers are not in fact enabling irresponsible behaviour by speculators enamoured of cheap money, not to mention politicians who can't curb their borrowing and spending, Carney merely remarks that voters in a democracy get the governments they choose.

http://www.cbc.ca/ne...ift-savers.html

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Here is part two.

Neil Macdonald: The illusion of growth

How central bank stimulus is creating a global 'bubble economy.' Power Shift, part 2

Mark Grant sits on the aft deck of his yacht in South Florida's spring sun, ostentatiously relishing his wealth as only an American does, and dispensing advice. He's made his money, and he likes to wear it.

Grant's personality is as big as his mansion and as flashy as his collection of exotic cars — he actually calls himself "The Wizard," a tribute to his own financial acumen.

While we are talking, his cellphone rings intermittently, and the callers are usually serious moneymen. Bill Gross of Pimco, the world's largest bond agency, is a friend; his praise adorns the dust jacket of Grant's recent book.

Inevitably, the callers are seeking investment advice.

A nearly 40-year Wall Street veteran, Grant is currently the managing director of a Texas-based investment bank and the author of a daily must-read investment commentary called Out of the Box.

His advice these days to tycoons and small investors alike is simple and direct. For heaven's sake, seek safety. Preserve your capital. "Keep what you have."

To Grant, the central banks' money printing has distorted the financial universe beyond any sensible dimensions.

The Federal Reserve alone is churning out $85 billion a month, or just over a $1 trillion a year. The combined balance sheets (which reflect created money) for the European Central Bank and the 17 individual banks of the eurozone stand at $3.45 trillion.

The Bank of England, the most energetic money printer in the world relative to the size of the economy it serves, has printed £375 billion (roughly $576 billion US), and is probably going to print more. The Bank of Japan has just launched an aggressive money-printing program of its own, planning to double the size of its balance sheet within two years.

In all, at the end of 2012, the balance sheets of the world's largest central banks, those of the G20 nations and the eurozone, including Sweden and Switzerland, totalled $17.4 trillion US, according to Bank of Canada calculations from publicly available data.

That is nearly a quarter of global GDP, and slightly more than double the $8.5 trillion these same institutions were holding at the end of 2007, before the financial crisis hit.

The idea behind all this central bank largesse is to reflate the world's money supply after the disastrous meltdown of 2008 and, at the same time, push interest rates down as far as possible in an attempt to get people — and companies — borrowing and spending again.

To date, however, the results have been mixed. The U.S. economy has been inching forward, while Britain's is teetering on a triple dip into recession. Much of Europe is also deep in recession and sinking under the weight of high unemployment.

Whether the massive money-printing program known as quantitative easing has prevented an even worse situation is debatable. But this much is certain: It's simply impossible to unleash such economic forces without serious consequences, intended and unintended.

Bubble economies

Just about everyone agrees the Dow Jones industrial average — the measure of blue-chip America — did not reach an all-time high recently because of vibrant economic growth or fabulous performance by the companies listed in that index.

Markets are where they are principally because the Federal Reserve has been gobbling up U.S. treasury bills, the safest investment on Earth, in a deliberate attempt to force private investors into riskier assets, like stocks.

It's a high-stakes form of market engineering.

The Fed has been acting in rare concert with central banks worldwide to encourage borrowing and spending — and risk. And because all the new money being unleashed has to flow somewhere, it's been flowing, among other places, into the equity markets.

At the same time, the super-low interest rates resulting from all this money printing have heated up real estate markets in big cities worldwide — Toronto and Vancouver being perfect examples.

Grant says the markets and governments have developed an addiction to easy, cheap money to finance irresponsible borrowing.

"All this printing of money is creating a market that rests on a fantasy," he says.

For the first time ever, there isn't a single bubble out there, but an "entire world in a bubble. Every asset class, everything you can think of. Everything is in a bubble and something is going to prick it.

"The party," he says with great certainty, "is going to end."

An enormous bet

Think-tank economists, who rely on econometric models and speak a language so encoded as to be incomprehensible to most people, tend to look down their noses at analysts like Grant, referring to them as "the newsletter crowd."

But Grant has shown prescience. He was among the very first to predict Greece's financial implosion, and he has correctly pointed up the book-cooking and outright fraud in other eurozone economies.

He is also far from the only one contemplating a bad ending.

Recently, the Bank of International Settlement in Basel echoed Grant's concern that markets are developing an easy-money habit; and the International Monetary Fund just published a paper acknowledging the possibility of all this money printing (which it calls "monetary policy plus") creating widespread bubbles and difficult adjustments down the road.

Ros Altmann, a pension manager and a governor of the London School of Economics, compares quantitative easing to treating a sick patient with medication that doesn't work, and then, when the patient gets sicker, administering even more.

"It must stop," she says. "It is hugely dangerous. I think history will judge this period very harshly."

Still, the central bankers have at least as many fans as they do critics.

Don Johnston, the former president of the Treasury Board in the Trudeau government and a former director of the Organization for Economic Co-operation and Development, admires them greatly.

"I think they have more credibility than politicians," he says, "and it's been very fortunate that nearly all central banks are independent of the political arm."

Johnston concedes that the central banks' power at the moment is "immense." But he adds: "We had a big fire, and they absolutely had a critical role to play, and they played it, I think, extremely well."

Still, even Johnston, with his deep experience in government finances, allows that he doesn't fully understand the complexities of today's monetary policy, and the arguments for or against opening the spigots as much as they have been.

By acting in concert to push the world in the same direction, the central bankers have made some enormous bets. And, says Johnson, "they'd better be right."

The trouble is, they've been wrong in the recent past.

Central bank economic forecasts in recent years have sometimes been well off the mark, meaning they, too, can be acting on mistaken assumptions.

Also, even someone as seemingly omniscient as Alan Greenspan, the Federal Reserve chief through the Bill Clinton and George W. Bush years, publicly admitted his blunder in refusing to regulate the murky world of credit default swaps, which acted as accelerant in the 2008 disaster.

How to 'unwind'

Conservative economists have predicted for years that expanding the money supply will inevitably lead to inflation, or even hyperinflation. That, of course, has not happened in this instance, mainly because there's been so little economic growth and because the world is awash in the production of consumer goods.

But the big question, nearly everyone agrees, is whether the central banks can "unwind" the unprecedented situation they've created without massive disruption (not least to their own balance sheets, which are now stuffed with long-term, low-interest bearing bonds as part of the quantitative easing).

It's an impossible question to answer.

The financial markets scrutinize the abbreviated minutes after every meeting of the Federal Reserve committee that authorizes QE, looking for any sign money printing is about to end.

That ending would signal a rise, perhaps even a sharp one, in interest rates, which could hit the housing market hard.

Homeowners with only a small amount of equity and who are already stretched to the limit would be sorely stressed.

Significant interest rate changes could also affect banks, pension funds and insurance companies, as well as small businesses that have been relying on cheap credit to expand payrolls.

And higher interest rates would also slam into government budgets. Politicians have come to rely on cheap money to finance their borrowing and spending.

Of course, the top people at the Bank of England, the Federal Reserve and the Bank of Canada all argue a return to normalcy can be managed.

Just as the central banks have the power to create money, says Canada's Mark Carney, they have the power to pull money out of the system, and will, slowly, as growth returns.

They can begin selling off the assets they've bought with all this new money, and they have the all-important power to set central interest rates. If growth takes off, in fact, they will have to do those things in order to contain inflation.

But no "unwind" will happen soon, says Carney. "The repair is ongoing."

In Florida, Mark Grant tells his clients that there are no good endings to all this, "only less bad endings."

One of the big causes of the 2008 meltdown was too much cheap money, he notes, "and there's a lot more now."

Mainstream economists can't agree on whether an orderly unwind can happen. But then, as Don Johnston points out, "economists don't know what they don't know."

Meanwhile, the central bankers all seem to have landed on the same side of the issue, and are marching in step, urging people to borrow and spend for the good of all.

"Ultimately," says Carney, "history will judge whether we got this right."

http://www.cbc.ca/ne...ift-growth.html

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Part 3

Neil Macdonald: The secretive world of printing money

The case for more public scrutiny of the central banks. Power Shift 3

Consider this: As America agonizes and argues over the pain of government cuts totalling about $85 billion next year, the U.S. Federal Reserve is printing that much every month.

Its current balance sheet — the amount of money it has created, the bulk of it in the past five years — stands at $3.2 trillion, about twice Canada's entire annual economic output.

The European Central Bank's balance sheet is even higher at $3.45 trillion, and others, like Japan, are racing to catch up.

When the record of the 2008 global financial catastrophe is fully written — that story remains a work in progress — the leaders of the world's central banks will emerge either as heroes, or the people who administered a cure that turned out to be as bad as the disease.

As of late last year, these central banks had printed about $17.4 trillion in new money, just over half of it in the past five years. That total is roughly a quarter of the annual economic output of the entire planet, and stock markets, banks and real estate have risen on this tide of cheap money.

Three of these bankers in particular will go down in history: Ben Bernanke of the U.S. Federal Reserve, Mario Draghi of the European Central Bank, and Canada's own Mark Carney, soon to be the governor of the Bank of England.

The world's central bankers are, in a sense, modern alchemists: They create these unimaginable sums of money out of binary electronic signals — to buy, among other things, government and retail bank debt and securities — with a few strokes of computer keys.

It's not an act they allow to be filmed or otherwise recorded. Actually, they permit very little recording of anything they do.

The plain fact is that these central bankers are executing what is perhaps the most profoundly important public policy of our time — an unprecedented printing of money and lowering of interest rates — with little in the way of public debate.

Such debate that is taking place is at rarefied levels among macroeconomists and other academics, or in the feverish blogs of the far right, whose members tend to see government conspiracy in just about everything.

But at least they're paying attention. Much of the mainstream media, fixated as it is on political horse races, is largely ignoring what's happening. There are honourable exceptions — economics specialists in certain newspapers and business-focused cable channels — but they are few.

The general public mostly hasn't a clue. Neither do many elected politicians, judging by some of the things they say publicly about the subject.

Hiding the bad news

What these bankers do with this new money they print is buy government debt, or shore up failing banks or teetering national economies or industries like housing or insurance, part of the policy they call quantitative easing.

They say, and many respectable experts support them, that quantitative easing has saved entire economies from imploding.

They also say — high priest-like — that they must keep the details of their discussions secret because their words could be misinterpreted, and entire markets could move on a misunderstanding.

And they stress they are operating entirely within the mandates given them by elected governments.

That's as may be.

It's also true the central bankers did not ask for the immense power they now exercise.

It was thrust upon them because the private sector made enormous, stupid, ruinous blunders, and because elected politicians were too terrified to make all the deeply unpopular decisions, like whether to let more banks fail, that had to be made when the financial meltdown started feeding on itself.

Politicians, given the chance, kick the can down the road; central bankers act.

But because of their mandate to maintain economic stability, they like to hide the bad news, or obscure it with vague euphemisms.

The transcripts of the U.S. Federal Reserve meetings make fascinating reading, even though they're only published five years after the decisions are made.

But the tone is a bit patronizing. Transparency and informing the public is clearly not high on the governors' agenda. They have drawn what one British financial regulator called a "veil of ignorance" around the subject of money printing.

"They see something coming, they may be right, they may be wrong. But they are bound not to tell the folks what they feel and see for fear that it will upset the system," says William Greider, an author and keen student of the U.S. Federal Reserve.

In Canada, Britain and Europe, central banks never release transcripts of internal discussions.

But while economists are divided on the wisdom of all this money printing, the central bankers aren't: They've marched together, to the same tune, since 2008, making a giant collective bet.

Don't tell the punters

Not since early last century, when the central bankers of Great Britain, Germany, France and Europe acted in concert to try to remediate the market crash of 1929, has such a radical policy been implemented on such a global basis.

Of course, those central bankers of yore did the exact opposite of quantitative easing. They actually tightened the money supply, and are generally blamed for having created the Great Depression.

That bit of history goes a long way to explain why today's central bankers are running the printing presses almost nonstop.

But there are huge implications for everyone in what's happening.

Some economists warn it will lead to inflation, or hyperinflation. So far, it hasn't because consumers, investors, and businesses, still nervous and wary, have sat on what cash they have, rather than embark on the sort of spending sprees the central banks are now trying to encourage.

But certainly all this QE has distorted asset prices, and pushed some stock markets to all-time highs.

It has also fuelled heavy borrowing and real estate bubbles in parts of the world. And it has punished people with savings, older people especially, by artificially depressing interest rates and the return on their money.

Should the money printing continue?

In the U.S., the far right sees the practice as a government conspiracy to destroy the money system.

Some days it feels like almost every second advertisement on Fox News these past few years has been for gold, supposedly the eternal hedge. Some crackpots are even planting survival gardens in anticipation of systemic failure.

The political left supports even more money printing, along the lines that Japan has recently embarked upon (a doubling over the next two years).

Among the suggestions: Lend directly to companies that need credit. Send free money to every household. Do whatever is needed to kick-start growth.

The fact is, it's impossible to know where all this is going, or whether the central banks, having addicted governments and consumers to cheap money, can close the money taps without enormous disruption to the system.

But it's something that screams for public discussion.

"It may be time for modern citizens to get educated about their own capitalism," says Greider, who says there is nothing democratically healthy about the bankers' opaque discussions and decisions on a scale like this.

Lord Adair Turner, the outgoing chairman of Britain's now-defunct banking regulator (the Financial Services Authority), summed up the bankers' attitude in February in a speech at London's City University. (It was there he spoke of "the veil of ignorance" in which bankers like to shroud their handiwork.)

Considered a front-runner last year for the Bank of England's top job (the one that went to Mark Carney), Turner suggested that the times are so dire that the central bank should consider simply printing every pound the British government needed to borrow, effectively monetizing its deficits, a practice, he concedes, that is generally considered taboo.

The problem in doing that, said Turner, is telling the hoi-polloi.

"Once we tell the populace and the popular press and the backbenchers of Parliament that this is possible, they'll want to do it not only in the one year out of 100 when it's appropriate, and not only in a reasonable amount, but all the time and in excessive amounts to try and win the next election."

Turner is right, to an extent. Politicians can certainly be pusillanimous fools, and voters uninformed. It would be nice if they weren't, but it is ultimately their right.

Still, unelected officials that operate at the behest of governments have no business cloaking such profound decisions. Few topics deserve more attention.

http://www.cbc.ca/news/world/story/2013/04/30/f-rfa-macdonald-monarchs-money-secrecy.html

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This has been known since the 70's.

There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West.

There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, reichmarks, rins, rubles, pounds, and shekels. It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic and subatomic and galactic structure of things today!

There is no America. There is no democracy. There is only IBM, and ITT, and AT&T, and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today. What do you think the Russians talk about in their councils of state, Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do.

We no longer live in a world of nations and ideologies... The world is a college of corporations, inexorably determined by the immutable bylaws of business.

The world is a business. It has been since man crawled out of the slime. And our children will live to see that... perfect world... in which there's no war or famine, oppression or brutality. One vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock. All necessities provided, all anxieties tranquilized, all boredom amused.

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America and Europe should take note. Iceland's solution to their financial crisis: Just let the banks fail.

You may have heard about Iceland’s toppling economy back in 2008. As one of the hardest-hit countries at the time, Iceland’s heavily criticized method to escape veritable economic demise actually did the trick.

Faced with the possibility of financial failure, Iceland had to think on its feet. Instead of bailing out banks USA-style, the country forgave mortgage debt for the population – and completely started over from square one.

A country with a small population of roughly 320,000 citizens, Iceland‘s entire banking structure “systemically failed” in the early days of the 2008 recession. Despite the fact that Iceland is still on the road to recovery, the country ranks high as a politically and economically stable nation. Their success over the last few years has been largely under-reported, and the story behind it is quite fascinating.

Let’s face it: Icelanders are tough. They are entirely isolated, living in frozen tundra, perpetually enduring less-than-optimal weather patterns. While they are surrounded by epic natural beauty, these people aren’t spoiled; they’re tenacious.

Instead of allowing the criminals responsible for bank fraud to run free as the years passed by, Iceland thought it might be wise to actually indict bankers who committed serious financial crimes that contributed to the collapse. By paying off loans for consumers, forgiving homeowner debt (up to 110% of the property value), and throwing the offenders in prison, Iceland was able to bounce back. Now, its economy is “recovered” and is growing faster than both the US and European economies.

When Iceland’s President Olafur Ragnar Grimmson was asked whether or not other countries – Europe in particular – would succeed with Iceland’s “let the banks fail” policy, he stated the following:

“Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail out banks is a theory that you allow bankers enjoy for their own profit, their success, and then let ordinary people bear their failure through taxes and austerity. 
People in enlightened democracies are not going to accept that in the long run.”

Grimmson’s “famous” reply to the controversial question, “What is the reason for Iceland’s recovery?” is most remarkable.

“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.”

Picking Up the Pieces On the Road to Recovery

Of course, though, everything isn’t all rosy. Many Icelanders have two or three jobs to sustain themselves and their families post-2008, and a sudden spike in taxes – an inevitable result of letting the banks fail – made the burden even harder to bear.

Though unemployment is down (it’s less than 5% of the population), you could say that “Iceland is a victim of its own success.” Very high standards of living and 60-70 hour work weeks create a bit of a pinch in the pockets. Difficult challenges lie ahead, but whichever way you look at it, Iceland did avert a seemingly incurable catastrophe. The point is that Iceland was criticized for allowing the banks to fail – and we now know that the disparaging remarks from scathing critics were too quick to judge.

Since 2008, Iceland has added jobs to its tourism and green energy sectors. In fact, according to the Icelandic Tourism Board, foreign visitors increased last year by 15.9% – and travel now accounts for 5.9% of GDP.

However unorthodox in its method, Iceland’s “let it fail” policy resulted in jubilation. We can’t seek perfection in the years after a global financial collapse, but we can acknowledge nations who persevered with integrity.

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When most world governments (our own included) are largely in debt due to years of deficit spending to keep an artificially high lifestyle for those that are now elderly you will have to excuse me if I don't shed a tear if all that debt is simply inflated away.

Only real mystery of posting this is whether one likes to blame their own economic and financial ineptitude on banksters and what not or are they simply gold bugs trying to win everyone over into storing more shiny metal under their back yard.

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America and Europe should take note. Iceland's solution to their financial crisis: Just let the banks fail.

Iceland's economic recovery after 2008 was quicker and more effective than what we're seeing in some other countries.

abgdp.jpg

Sure, Iceland is a small-scale scenario, but i'm thinking that central banks don't want this solution to be well-known. Esp. the part about jailing the bankers.

If the globe simply 'forgave all debt', wouldn't the only losers would be the banks? It's this kind of thinking that must have them cringe. And i can see it happening one day too.

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When most world governments (our own included) are largely in debt due to years of deficit spending to keep an artificially high lifestyle for those that are now elderly you will have to excuse me if I don't shed a tear if all that debt is simply inflated away.

Only real mystery of posting this is whether one likes to blame their own economic and financial ineptitude on banksters and what not or are they simply gold bugs trying to win everyone over into storing more shiny metal under their back yard.

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For full disclosure, I haven't saved any money. I have only been working for a year now and still have a lot of student loans to pay off.

I just want people to be more informed about something so important but no one talks about. Sure, people love to rant on about the HST but they don't realize how much more important the policies of the BoC are.

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The policy has savaged pension and savings returns worldwide, but particularly in Britain, a nation of savers and pensioners.

There is more money in British pension funds than in the rest of Europe combined, and now that money is just sitting, "dead," as some call it, not working for its owners.

Ask Judy White, a retiree in her late 60s who lives in Teddington, south of London, with her husband, Alan.

This year, the Bank of England shattered her retirement. Her pension benefit was effectively slashed by half.

"I don't understand what quantitative easing is, except that it's printing money," she says. "But I do understand that I now have 50 per cent less.

"What they have done is take money from people who have been really careful all their lives."

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Just about everyone agrees the Dow Jones industrial average — the measure of blue-chip America — did not reach an all-time high recently because of vibrant economic growth or fabulous performance by the companies listed in that index.

Markets are where they are principally because the Federal Reserve has been gobbling up U.S. treasury bills, the safest investment on Earth, in a deliberate attempt to force private investors into riskier assets, like stocks.

It's a high-stakes form of market engineering

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It was thrust upon them because the private sector made enormous, stupid, ruinous blunders, and because elected politicians were too terrified to make all the deeply unpopular decisions, like whether to let more banks fail, that had to be made when the financial meltdown started feeding on itself.

Politicians, given the chance, kick the can down the road; central bankers act.

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America and Europe should take note. Iceland's solution to their financial crisis: Just let the banks fail.

Iceland's economic recovery after 2008 was quicker and more effective than what we're seeing in some other countries.

abgdp.jpg

Sure, Iceland is a small-scale scenario, but i'm thinking that central banks don't want this solution to be well-known. Esp. the part about jailing the bankers.

If the globe simply 'forgave all debt', wouldn't the only losers would be the banks? It's this kind of thinking that must have them cringe. And i can see it happening one day too.

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While the Dow Jones (or better yet S&P 500) are at all time highs their price to earnings ratio of the S&P is around 15 which is actually quite reasonable. While inflation pressures are upping the values of everything (including stocks) the market value is right there with fundamentals.

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And yet some people want more government involvement/regulations, even though those politicians and bureaucrats in the pockets of powerful lobbies.

Government shouldn't be involved with business and vice versa. The "invisible hand" needs to be enforced. If some bank is doing some funky high-risk investments and fails, just let them. While it sucks for investors, savers and other stakeholders, that's why you gotta be informed.

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Seriously? You can mention fundamentals with a straight face when the Fed is gobbling up $85,000,000,000 (that's BILLION) of assets per months? What is fundamental about that?

P.S. if anyone wants to read a fantastically well written article about the financial crisis in Iceland click this link. It's called "Wall St on the Tundra" from 2009.

http://depts.washing... vanityfair.pdf

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