To quote the inestimable Scott Sumner: Iceland did almost everything right. They stiffed the bank creditors to avoid aggravating the moral hazard problem, jus

To quote the inestimable Scott Sumner: Iceland did almost everything right. They stiffed the bank creditors to avoid aggravating the moral hazard problem, just like the textbooks recommend. In the eurozone the bank creditors are being bailed out. They relied of fiscal policy to address S/I and debt issues, and let monetary policy address AD, just as the New Keynesians were recommending in the 1990s. In the eurozone they combined tight money with reckless deficits. And now Iceland is growing fast and the eurozone is stagnating. http://www.themoneyillusion.com/?p=14895 http://www.themoneyillusion.com/?p=14895