Dan White: The economic return of Iceland has proved that the joke was on us

Not only did I forecast the collapse of the Icelandic bubble due to its obscene 100 x leverage ratios in their banking system, I also forecasted Iceland's subsequent recovery due to their default from debt obligations to British and Dutch banks.  While painful and inflationary for several years, default is necessary to cleanse out the excesses--and to re-emerge from the other side.  Iceland traded in decades of financial chaos and economic stagnation, and instead took their bitter medicine to recover within five years.  By stiffing their creditors, they cleared the toxic debt from their previously impaired balance sheets.

This Irish author correctly chronicles why Iceland and Ireland have had two very different outcomes.  Despite Ireland's bail out, they are even more indebted to banks, and have only extended and exacerbated their pain.  The neo-Keynesian solution of piling new debt on top of old debt will end in tears for the developed world--for decades.

http://www.independent.ie/business/irish/dan-white-the-economic-return-of-iceland-has-proved-that-the-joke-was-on-us-3327164.html