Iceland let it's banks default, and is now doing rather well.

In fact, bank failure and then having the government only guarantee ~$50k of funds per person is a good way to hand wealth to the people and take it from corporations and the super wealthy.

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embedding-shape 9 hours ago | parent | next [-]

> good way to hand wealth to the people and take it from corporations and the super wealthy

Hence the power that be try to prevent it best they can. In some cases, unsuccessfully (Iceland) and in others, a bit more successful (the US). But seemingly, they're only able to delay the inevitable, not completely prevent it.

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bulbar 6 hours ago | parent | prev | next [-]

Big corporate borrowed the money already, so it will stay with some (other) big corporate in this scenario. The bankers who did it will see that coming and move their money elsewhere and keep their money as well.

What you suggest will hit normal persons.

What we really need is people going to jail that let stuff like that happen. Let them bear actual responsibility for their 1,000k+ salary.

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adjejmxbdjdn 7 hours ago | parent | prev | next [-]

The U.S. also let a bank collapse and shit hit the fan across the world.

The global economy isn’t pivoting off Icelandic banks the way it is off US ones.

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petesergeant 9 hours ago | parent | prev | next [-]

> and is now doing rather well

I was going to write a shitty reply to this, but the more research I did, the more it seems actually this went pretty well for them. UK and NL governments that lost deposits in the Icelandic banks mostly got their cash back (eventually), there was recession and unemployment but not that much worse than other countries, and the country is in good standing again with the markets.

I would note that this is much much easier to do if your investors are foreign, rather than domestic pension funds, so it doesn’t bring down the government, though.

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laughing_man 8 hours ago | parent | prev | next [-]

Iceland's banks were full of money from people in the UK. It's a lot easier to default when there only a small political and economic price.

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hparadiz 8 hours ago | parent [-]

Is everyone just glossing over the fact that the feds make a profit on bailing the banks out? Seems like a win win to take over ownership in the event of a bank failure.

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pfannkuchen 7 hours ago | parent | next [-]

Was this definitely not accounting trickery? Like even the way money is created is intentionally convoluted and approximately 1% of the population even attempts to understand it. Can we really trust the accounting of bank bailouts which stood to be unpopular when the accounting produced a convenient outcome? Has anyone plausible analyzed this to a convincing level of detail?

	▲	hparadiz 6 hours ago \| parent [-]
		This was explained by Jon Stewart on The Daily Show ad neausum in 2008 and was common discourse for years after. No. It's not accounting trickery. Rather than allow the company aka the bank to go fully bankrupt the government simply forces a sale of the shares of the bank to the government. The original stock owners basically take a cap gains loss (potentially based on their cost basis). The bank then continues to operate as normal. This prevents a run on the bank and keeps it stable. Then 2-3 years later the stock recovers and the government sells its shares. Since they bought low this is highly profitable. Anyway yes and yes. The 2008 bailout ended up making a profit for tax payers. Thanks Obama.

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londons_explore 8 hours ago | parent | prev | next [-]

If there was a reliable profit to be made, a third party would do it.

I suspect the real profit is made by also being in a position to adjust laws and rules to make sure your investment survives, as well as turning low rated bonds effectively into government bonds. All those things are at the expense of others in the bigger picture.

	▲	hparadiz 8 hours ago \| parent [-]
		3rd parties don't have the capital to front the losses. That's the whole point for the government to do it. The feds get the advantage that they basically get to force the existing creditors to sell at a loss. Presumably that's what everyone here wants. The existing owners to pay a penalty on the failure and for everyone else to remain whole if possible. Well that's exactly how a bank "bail out" works. So what's the actual problem? The only one's "hurt" are the owners who miss managed the business.

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actionfromafar 8 hours ago | parent | prev [-]

The "feds" as we used to know them are going extinct. They are all being replaced by GOP apparatchiks, who care only to look good to the Leader.

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short_sells_poo 8 hours ago | parent | prev [-]

The issue is that major US banks are systematically important to the US and also everyone else. Practically nobody cares about Icelandic banks - not even their depositors if their deposits were protected by the state (which they were).

If a bank like JP Morgan were to fail, the event would be without exaggeration cataclysmic to everyone, even small local banks and credit unions. Even if ultimately the clients of JPM could be made whole, the weeks of uncertainty and frozen funds would single handedly obliterate the financial systems across the globe. It's the age old adage: "if you get margin called and get wiped out, it doesn't matter that you'd have recovered just 2 weeks later". The world as a whole is deeply leveraged. It's that leverage that affords us the ability to supercharge all the growth, from AI to drugs research, insurance, EV... everything. But that leverage comes at a cost, which is that systemically important institutions failing can have disastrous cascading de-leveraging effects.

I'm sure we'd more or less all survive and the world would recover, but it would likely be a 2008 GFC style scenario most likely.

	▲	dofm 8 hours ago \| parent [-]
		The collapse of Landsbanki was absolutely not a nothingburger. Risked triggering a 21st Century Cod Wars: the UK government was forced to use organised crime laws to freeze its UK assets to protect UK savers in Icesave, to whom the Icelandic government did not clearly intend to extend protection.