tag:blogger.com,1999:blog-2337955139592394138.post363451641543321974..comments2014-06-27T09:52:04.680+10:00Comments on Comments from the edge: Too big to fail? Ireland v IcelandToadhttp://www.blogger.com/profile/09876500132939057719noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2337955139592394138.post-8863090871141724082010-10-27T13:07:05.370+11:002010-10-27T13:07:05.370+11:00Toad
You've got me thinking. In theory, a c...Toad<br /> <br />You've got me thinking. In theory, a country should be able to make a rational decision about whether to (a) all go bankrupt now and have everyone start saving again for retirement and living with the private austerity which that involves or (b) prop up the nation's investments now with public debt and start living with paying higher taxes and lower government handouts. But whilst investors can make that sort of decision, in Iceland's case, it was voters who decided (which includes many people who just dont care (yet) about retirement) and I think you could accept it as a rule that voters in any country don't want to pay any more tax than they already do. So in that way I see the plebiscite as no more than a predictable confirmation of that preference, and a very understandable, and overdue, get fucked to fat cat bankers. <br /> <br />In terms of the numbers, I just can't see that there could be any real difference between Iceland and Ireland by reason of this issue as opposed to where they started from. I can see the figures might look like they point one way, but would that really be the case once Icelandic private austerity is factored in, which will be required if Icelanders are to fight their way out of this (ie the reduction in domestic consumption needed to fund the forced private savings). And isn't the Icelandic situation already a little better for the UK and Netherland stepping in to guarantee part of their banking debts? Has anyone done that for Ireland?<br /> <br />But, for mine, the thing that is vexing me is this. Do they really want to fight their way out of this? Dont they really just want to get bailed out. I’m thinking it cant be anything but the latter, and frankly I'd do the same. I’ve read that local newspapers are running some line that Norway should step in pay off the debt. You were outraged by the Greeks in a previous post. Isn’t it inevitable that Icelanders will accept international funds (backed by taxpayers in those countries)?? Someone has to pay for the Icelandic debt and turning their back on it won't change anything for them. All that oil in the Gulf of Mexico didn't just disappeared either; its gone somewhere but right now no one with any power in the US wants to think about it. Of course getting someone else to pay for your debts is a great idea if you can get away with it but I don’t see it as heroic.<br /><br />Finally, can I say I’m glad to see you are continuing your blog.Petehttp://twitter.com/PeteToynoreply@blogger.comtag:blogger.com,1999:blog-2337955139592394138.post-68857473579429009532010-10-17T22:10:44.846+11:002010-10-17T22:10:44.846+11:00Hi Dave,
thanks for your comments.
Conceptually,...Hi Dave,<br /><br />thanks for your comments.<br /><br />Conceptually, I like the Shafted Index but it does presume that bail outs serve no purpose other than to save banks. I'm still not 100% convinced they don't have social value. Its an argument that's there to be won.Toadhttps://www.blogger.com/profile/09876500132939057719noreply@blogger.comtag:blogger.com,1999:blog-2337955139592394138.post-82528340365751151642010-10-17T11:56:19.714+11:002010-10-17T11:56:19.714+11:00Thanks Toad for a well written & interesting a...Thanks Toad for a well written & interesting analysis. I'd be keen to see a breakdown of "Bad financial sector debt (private) that was offloaded to the taxpayer (public)" per capita -- across countries like Ireland, USA, Iceland, Spain.<br /><br />As a % of average annual income this would offer a tidy "Shafted Index" against populaces around the globe -- and seed a comparison re: the public's response v.s. the degree to which they were shafted by their particular Kleptocracy.<br /><br />There is a bargain being made here: Because our banks are "too big to fail", each of you will carry a (Shafted Ratio times your annual income worth of) debt because the private bets our bankers made didn't come in.<br /><br />At what Shafted Ratio does a populace go all Iceland and say "Oh a GFC ? How about you GFY ?"Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2337955139592394138.post-43014183006452883952010-10-10T08:47:38.428+11:002010-10-10T08:47:38.428+11:00Ric and Vic, thanks for reading.
Ric you raise an...Ric and Vic, thanks for reading.<br /><br />Ric you raise an interesting question: How to prevent bankers taking stupid risks in the first place? <br /><br />In my view leaders with a bit of skin in the game are less likely to let the system run out of control.<br /><br />I think here Iceland might also have a good idea. They have charged their former Prime Minister with criminal negligence over this whole matter. He could do two years if convicted.<br /><br />That might give the next leader pause for thought when risking taxpayer funds.<br /><br />http://www.heraldsun.com.au/news/world/iceland-ex-prime-minister-faces-court-over-bank-crisis/story-e6frf7lf-1225932064016Toadhttps://www.blogger.com/profile/09876500132939057719noreply@blogger.comtag:blogger.com,1999:blog-2337955139592394138.post-19246753662729278212010-10-10T06:37:13.040+11:002010-10-10T06:37:13.040+11:00in the end it shows how important it is not to let...in the end it shows how important it is not to let banks deal with other people's money without independent and diligent regulation- ricAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2337955139592394138.post-2751131391924370702010-10-10T05:26:31.525+11:002010-10-10T05:26:31.525+11:00Thanks Toad. For reasons not entirely clear to me...Thanks Toad. For reasons not entirely clear to me, I really prefer the tough love approach and am hoping for some justification that it really is better in the long term. I think I want people who take risks (ie investments that return greater than cpi) to be shown that the word "risk" means that you can lose all your money.<br /><br />Have you read "The Black Swan" by Nassim Taleb (http://amzn.com/081297381X)? Very interesting analysis of risk and the usefulness (or lack thereof) of the Gaussian/normal distribution.<br /><br />VicAnonymousnoreply@blogger.com