Iceland Flips The Bird At IMF, BIS And World Bank

“Fitch has upgraded the country to investment grade BBB – with stable outlook, expecting government debt to peak at 100pc of GDP.

The OECD’s latest forecast said growth will be 2.4pc this year, after 2.9pc in 2011.

Unemployment will fall from 7pc last year to 6.1pc this year and then 5.3pc in 2013.

The current account deficit was 11.2pc in 2010. It will shrink to 3.4pc this year, and will be almost disappear next year.

The strategy of devaluation behind capital controls has rescued the economy. (Yes, I know there is a dispute about exchange controls, but that is a detail.) The country has held its Nordic welfare together and preserved social cohesion. It is slowly prospering again, though private debt weighs heavy.

Nobody is forcing the elected government out of office or appointing technocrats as prime minister. The Althingi sits untrammelled in its island glory, the oldest parliament in the world (930 AD).

“The outcome is a vindication of sovereign currencies and national central banks able to respond to shocks.”


Iceland has changed from an externally controlled, interest-bearing money supply to an internally controlled, interest-free money supply. Its total GDP is now what it owes itself, with excesses due to devaluation & current deficits paid back by next year.

“The contrast with the unemployment catastrophe and debt-deflation spirals across Europe’s arc of depression is by now crystal clear. Those EMU shroud-wavers who persist in arguing that exit from the Europe would be suicidal will have to start coming up with a better argument.”

Bottom Line:

Iceland’s books balance. The nation is virtually debt-free. There are no longer any destroyers siphoning off its wealth. Its people are going back to work toward general prosperity. There is no blood in the streets.