While we hope you enjoyed a good weekend, we know there was a lot going on over the last couple of days. Maybe you caught the wonderful moment immediately before the Husker football game at Penn State, led by Husker Coach Ron Brown - or the embarrassingly awful GOP presidential debate on CBS. Maybe you were drowning in preparations for Thanksgiving and the upcoming holiday season.
The stories that may have floated out of your attention zone over the weekend include the resignation of Italy's Prime Minister Silvio Berlusconi, the announcement of his replacement, and the installation of an interim government in Greece. We were watching events in both countries, as were many around the globe. In our modern world of highly connected economies, what happens in Japan or Europe, Brazil or China, can have an equal effect here in the United States.
For all the bluster of political candidates telling you America is uniquely different, when it comes to the reality of how the real world market works, the U.S. is just another refugee bobbing on a mostly uncharted ocean of economic uncertainty. Admittedly, our financial raft is better than what most countries have - some don't even have a piece of metaphorical flotsam to hang onto. Still, at this point looking to our traditional economic and political partners in Europe to save us from our own economic woes is pointless. Even now, countries like Italy are doubling down on the failed strategy of economic austerity.
As one of our favorite economists, Nobel-prize winner Paul Krugman pointed out Friday, the European experiment in painful austerity isn't as effective as hoped - and doesn't confirm the American conservative worldview. In fact, as the revival of Iceland's economy is clearly pointing out, the American people - especially those supporting the Occupy movement - have been right all along.
In case you missed it, the story going on in Iceland really began in the early 2000s, when Iceland followed the lead of countries like the U.S., loosened its regulation of banks, and allowed investment and deposit banks to mingle with each other and other banks around the world. In 2008, when the market implosion of Wall Street spread like a virus around the world, the three major private banks in Iceland all collapsed under the weight of the bets they'd made (a large portion of which was in the U.S. real estate market), and had to be nationalized.
As Dr. Krugman also recently pointed out, nearly everyone projected that Iceland was going to go into economic Armageddon if they didn't follow the lead of everyone else - save the banks, screw the working people, and make the public pay the price.
Iceland, however, did exactly the opposite.
Over the weekend, Iceland announced that they were finally going to begin paying out a small portion of foreign depositor claims, after their highest court upheld a law that protects the common people and the public welfare. Further, Iceland's Economy Minister said that all legitimate depositors, whether in Iceland or from other nations, will be repaid their full amounts of deposit. Investment bankers, however - like the Wall Street gamblers and their corporate cronies - will have to deal with the pile of bad bets they made all by themselves.
In other words, Iceland bailed out Main Street, and told the greedy gamblers on their version of Wall Street to enjoy their trip to the depths of the financial Davey Jones' locker.
So far, even in the midst of a global recession, Iceland's method of salvation is the only one that seems to be doing more than just keeping their nation treading financial water.
We think it's high time the U.S. tried a similar strategy.
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