Iceland and Ireland were both rocked by the fallout of the Global Crisis. This column argues that differences in currency arrangements affected the mechanisms of the boom and the collapse. Iceland’s banks collapsed because they did not have a lender of last resort in euros. Ireland did. But Iceland’s collapse and ensuing capital controls shifted the burden of debt restructuring onto foreign creditors to a much greater extent than in Ireland.
Stephen Kinsella, Hamid Raza, Gylfi Zoega, Saturday, July 4, 2015
Thorvaldur Gylfason, Thursday, April 16, 2015
Whereas some argue there is no need to revise the US constitution, others believe that its inherent flaws are in the core of the US’ decreasing power. This column reviews four alleged flaws of the US constitution. There is a striking similarity in method and substance between current proposals for constitutional reform in the US and the post-crash constitutional reform process in Iceland presently held captive by parliament..
Friðrik Már Baldursson, Richard Portes, Monday, January 6, 2014
In 2008, Icelandic banks were too big to fail and too big to save. The government’s rescue attempts had devastating systemic consequences in Iceland since – as it turned out – they were too big for the state to rescue. This column discusses research that shows how this was a classic case of banks gambling for resurrection.
Friðrik Már Baldursson, Richard Portes, Tuesday, November 12, 2013
Iceland’s 2008 capital controls are still in place to prevent outflows of domestic holdings in failed cross-border banks. However, it is important for the country’s future economic prosperity to lift the capital controls without endangering financial stability. This column discusses the risks of capital controls and gives policy recommendations for cases of the three former major Icelandic banks.
Jon Danielsson, Tuesday, May 21, 2013
Icelandic voters recently ejected its post-Crisis government – a government that successfully avoided economic collapse when the odds were stacked against it. The new government comprises the same parties that were originally responsible for the Crisis. What’s going on? This column argues that this switch is, in fact, logical given the outgoing government’s mishandling of the economy and their deference towards foreign creditors.
Anne Sibert, Tuesday, April 2, 2013
Depositors in Eurozone banks are facing a steep learning curve on just exactly what deposit insurance means. This column points out that the precedents set in Cyprus and Iceland show that deposit insurance is only a legal commitment for small bank failures. In systemic crises, these are more political than legal commitments, so the solvency of the insuring government matters. A Eurozone-wide deposit-insurance scheme would change this.
This reposted column corrects an error, due to the editor, that was in the first posting.
Jon Danielsson, Thursday, March 28, 2013
Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment. We can only hope the authorities that created the chaos in the first place realise that temporary really needs to mean temporary.
Thorvaldur Gylfason, Thursday, November 1, 2012
Iceland is in the middle of a major constitutional overhaul. This column looks at the unorthodox use of a referendum in drafting the constitution and argues that this democratic element could lead to its long-term success.
Thorvaldur Gylfason, Wednesday, April 11, 2012
Most economists would agree that the global financial and economic crisis was at least partly caused by a failure in the regulation of the financial sector. While regulatory reform is now being debated throughout the world, critics argue that it is only a matter of time before any new regulations are removed by powerful interest groups. This column asks whether prompt corrective action belongs in constitutions.
Jon Danielsson, Ragnar Arnason, Monday, November 14, 2011
The IMF has emerged from the global crisis bigger and more powerful. But this column argues that the capital controls it required Iceland to adopt in 2008 are not of the soft and cuddly modern type that slow hot money flows. Instead they are akin to the draconian controls common in the 1950s. They violate the civil rights of Icelanders and significantly hamper economic growth.
Friðrik Már Baldursson, Tuesday, November 8, 2011
During the global crisis, Iceland was hit by the biggest banking crisis any country has ever suffered. This column reviews the role of the IMF in Iceland’s recovery. It argues that the IMF programme was not perfectly designed but successful. Iceland re-entered capital markets less than three years after the crisis.
Jon Danielsson, Thursday, October 27, 2011
According to the IMF, Iceland has graduated from its Fund-supported programme with unqualified success. This column begs to differ.
Jon Danielsson, Wednesday, October 26, 2011
Much of macroeconomic policymaking is trial and error. This column discusses calamitous error on the part of Iceland’s policymakers, in the hope that others can at least try something else.
Thorvaldur Gylfason, Tuesday, October 11, 2011
As economic protests continue throughout Europe, many wonder whether such efforts will be in vain. This column explores what happened in Iceland, where a “pots-and-pans” revolution in response to the devastating financial crisis gave rise to demands for a new constitution.
Thorvaldur Gylfason, Wednesday, June 1, 2011
The global crisis has brought many countries to their knees, none more so than the small island of Iceland whose losses amount to seven times its GDP. Yet while Iceland’s recovery has in many ways been remarkable, this column argues that the country’s capital controls stand in the way of further progress.
Gylfi Zoega, Jon Danielsson, Wednesday, April 27, 2011
Icelanders have voted against providing a government guarantee for claims made by the UK and the Dutch governments against Iceland’s deposit insurance fund. This column argues that the heated debates surrounding the referendum may provide a glimpse into the challenges that lie ahead for European policymakers as they attempt to allocate losses suffered by banks between the taxpayers of different countries.
Friðrik Már Baldursson, Monday, January 10, 2011
Is the Icesave dispute between Iceland on one side and the Netherlands and the UK on the other becoming a real-life version of Groundhog Day – where we are trapped in the same day that repeats for all eternity? This column discusses what can be done to return us to normality.
Anne Sibert, Tuesday, May 18, 2010
Investigation of Iceland's meltdown has revealed dodgy behaviours ranging from neglect to criminal fraud. This column describes how Icelandic banks issued “love letters” to each other – swapping their debt securities and using the other bank’s debt as collateral. This ruse ensnared not just the Icelandic Central Bank, but also the ECB – a fact that has only recently come to light. The ECB's lack of transparency on this is a serious problem.
Thorvaldur Gylfason, Friday, April 30, 2010
What brought down Iceland’s banks? This column examines the revelations from the latest report from the Icelandic parliament, raising the possibility that the collapse of Iceland’s three largest banks is the result of “control fraud” where shareholders stole from their own bank in the same way as those convicted of looting from the American saving and loan banks in the late 1980s.
Thorvaldur Gylfason, Saturday, February 13, 2010
How to stop a repeat of Iceland’s crisis – both in the country and elsewhere? This column provides eleven lessons covering asymmetric information, moral hazard, better warning systems and improved regulation, preventing banks becoming “too big to fail” and restricting asset bubbles, holding creators of externalities to account, and providing safeguards on political interference.