Iceland, in 2009, let its banks default on foreign depositors. The nation suffered a brief recession. Now it is growing. Europe is in recession.
Default pays off.
The nation had six multi-billionaires in 2007. Now it has none. The lone survivor has left the country. He used to have $6 billion. He lost $5 billion. The other five lost all or most of their money.
It looked so easy in 2007. It looks so stupid today.
Inflation makes very rich people. Popped bubbles bring them back to earth, fast.
Ireland played by the bankers’ rules. The government bailed out the big banks. It is still mired in recession. Its people are permanently burdened with massive government debt — unless Ireland’s government defaults (It will.)
Iceland did not play by the bankers’ rules. Its recession is over, at least for now.
The experts in finance pretend Iceland isn’t there. It did better than the Eurozone nations have done. It refused to bail out the bankers. The idea that a nation can do well by not bailing out bankers is anathema in places of influence. In the view of bankers, whose ideas prevail, it is the first responsibility of all politicians to bail out big banks.
Today, the Parliament of Cyprus may decide to follow Iceland’s lead. The Eurocrats are wetting their Depends in fear. They keep issuing statements that none of this is relevant, that Cyprus is unique, that the contagion will not spread.
How do they know? They thought that the Parliament of Cypress would roll over and play dead. It didn’t.
When governments fail to back up big bankers from the results of their stupidity, billionaires lose money. The taxpayers don’t.