Welcome Back from the Brink, Iceland

Apparently that's their story and they are sticking to it. 11% interest rates! We have a better chance of seeing a rainbow-puking gay unicorn with a pink velvet bow tied around its ass than 11% interest rates here, of course, but we're not talking about America we're talking about Iceland.

Welcome back from the brink. I guess.


Iceland's central bank has cut interest rates to 11% from 12%, as hopes build that the country is starting to stabilise after the financial crisis.

Interest rates have now fallen significantly since March, when they stood at a record high of 18%.

Iceland had held rates high in order to defend its currency, which came under threat as a result of the collapse of the country's banking system last year.

The krona has now stabilised, which means the central bank can lower rates.

Iceland's financial system collapsed last October under the weight of debt, leading to a currency crisis, rising unemployment and public protests.

As a result, it was forced to agree a $10bn (£6.1bn) aid package with the International Monetary Fund.

"There has been a huge turnaround in the current account, from deficits of 20% of GDP. Now it's positive," said Kent Baek Iversen at Jyske Bank.

The reason, he said, was the weak krona, which has made Icelandic exports more competitive.

Zimbabwe Ben has a thing or two to learn from Iceland, IMHO, like how sometimes you've just got to jack up interest rates until it hurts.

Speaking of "until it hurts," our friend Negocios Loucos has a great - albeit made-up scenario involving Fed raids, ZB, and my rubber gloved hand ready to perform one hell of a forensic Fed audit over at WC Varones. Check it out.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


B said...

Long Iceland.

You might find this lecture by Steve Keen interesting. He's long supported a debt jubilee, as do I. The prevailing economic models do not consider debt.


High interest rates would go a long way to cleaning out the junk from our system. It's like a band-aid. Do you want to pull it off fast or slow? Either way it is coming off, and either way it is going to hurt. I say, give that fucker a hard rip.

I like how you think, B.

thanks for the link :)