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Question I wonder is: Iceland is tiny. Like TINY tiny kind of tiny. Their National GDP is $12.57 billion USD. America spends about $20.2 billion a year on air c
by betterth 14y ago
Question I wonder is: Iceland is tiny. Like TINY tiny kind of tiny. Their National GDP is $12.57 billion USD. America spends about $20.2 billion a year on air condition in Afghanistan.
The point being -- the world economy can (and did) withstand the default and destruction of the Icelandic finance system.
Could it have survived the default and destruction of the American finance system? Or would our incredibly interlinked, globalized finance system bring down the world economy with it?
- nickik 14y agoAcctually it is very, very unlickly that the American finance system would have blown. Everytime the US has bailed out banks unter the premis 'to big to fail' later analysis has shown that the impact would have been much smaller. There is a book about that: "Too Big to Fail: The Hazards of Bank Bailouts" http://www.amazon.com/Too-Big-Fail-Hazards-Bailouts/dp/081570304X/ref=tmm_pap_title_sr http://www.amazon.com/Too-Big-Fail-Hazards-Bailouts/dp/08157... or maybe better for most people a podcast with the auther: http://www.econtalk.org/archives/2009/10/gary_stern_on_t.html http://www.econtalk.org/archives/2009/10/gary_stern_on_t.htm... It was acctually the feds intervention (paying banks to hold reserves) not the fall of leeman that froze the holesale lending market.
- Symmetry 14y agoGood question, but I think the important thing to reduce moral hazard is that the bank's investors or creditors take it on the nose, not that we allow the bank itself to collapse. Still, it is a more complicated question for the US than for Iceland.