Why Ireland should look to Iceland for advice

dlouth15

Scofflaw wrote: »

And I hate to refuse your charity, but must, alas! I am specifically disagreeing that one can make such a claim about Iceland's central bank during the collapse of their banking system because of the existence of highly confounding factors, specifically the capital controls whose institution preceded the collapse of the banks, but to a lesser extent also the small size and high social cohesion of Iceland.

The claim I made was that the existence of an Icelandic central bank ready to provide liquidity helped stop a bank run in Iceland. This is the claim you started to dispute but after arguments were put forward to dispute it, you eventually conceded that it was true. Your assertion that capital controls, though they may have played a role, prevented a bank run was shown to be lacking foundation. You failed to show that there would have been a run had they not been put in place as there are reasons for having them that have nothing to do with bank runs and indeed the official reason for them was currency stabilization. You provided an incorrect date for the eventual imposition of said controls. The correct date is the 1st of November of that year.

I'm not going to continue further with this because my initial remark you eventually agreed with: that the central bank's ability to provide liquidity, in itself helped run. I don't know whether your misinterpretation of my initial post was genuine or whether it was a face saving measure to avoid admitting that you lost the argument but that is not really important now.

Scofflaw

dlouth15 wrote: »

The claim I made was that the existence of an Icelandic central bank ready to provide liquidity helped stop a bank run in Iceland. This is the claim you started to dispute but after arguments were put forward to dispute it, you eventually conceded that it was true. Your assertion that capital controls, though they may have played a role, prevented a bank run was shown to be lacking foundation. You failed to show that there would have been a run had they not been put in place as there are reasons for having them that have nothing to do with bank runs and indeed the official reason for them was currency stabilization. You provided an incorrect date for the eventual imposition of said controls. The correct date is the 1st of November of that year.

I'm not going to continue further with this because my initial remark you eventually agreed with: that the central bank's ability to provide liquidity, in itself helped run. I don't know whether your misinterpretation of my initial post was genuine or whether it was a face saving measure to avoid admitting that you lost the argument but that is not really important now.

I'm sorry you feel that we've got tangled on this - I do hope it won't put you off arguing with me in future, because I respect your willingness to engage in a factual way with issues. My disagreement with you on this point is, however, neither a face-saving exercise nor a misunderstanding. Let me clarify my position, which is at least two-thirds disagreement.

You stated "the existence of an Icelandic central bank ready to provide liquidity helped stop a bank run in Iceland". I said that the imposition of capital controls probably had more to do with it, and have also stated that there's nothing we can actually learn from Iceland in the matter.

I distinguished two types of bank run - a retail bank run - that is, local people lining up outside the bank to withdraw their savings, and a 'deposit flight', which consists of higher-value 'mobile money' fleeing the country's banking system.

In the case of the latter, I cannot see how the CBI's willingness to provide liquidity has any positive effect - because for foreign depositors the provision of liquidity by the ICB would in any case damage the value of their deposits through the effects on exchange rates. So I see capital controls, of the two, as entirely responsible for preventing this type of bank run.

In the case of the former, I do agree that it may have helped, but cannot regard the matter as provable, because capital controls were instituted simultaneously with the nationalisations. As such, while one might feel that the ICB provided a "no need to run", that's effectively superseded by the capital controls' "nowhere to run anyway". We cannot know that Icelanders felt sufficiently reassured by the ICB not to flee the Icelandic banking system for foreign banking systems, because they didn't have that option - and that's before we get onto the difficulties and disadvantages of moving their money, or whether they might have been concerned by the possibility of retaliatory seizures in foreign jurisdictions.

Finally, on whether this is something we can "learn from Iceland" on, I can't see what we would be supposed to be learning. There were no retail bank runs in Iceland, certainly, but there were no retail bank runs in the eurozone either. What we learn from that, if you like, is that the ECB apparently does an equivalent job to the CBI, but without capital controls.

So, of four points, I would agree with you on one, but have to say that the point in question is a matter of opinion. The main thrust of my disagreement has been all along that this is not somewhere where we can learn from Iceland, at least if the lesson is supposed to be the value of national central banks and national currencies.

cordially,
Scofflaw

Sand

dlouth15 wrote: »

I'm not going to continue further with this because my initial remark you eventually agreed with: that the central bank's ability to provide liquidity, in itself helped run. I don't know whether your misinterpretation of my initial post was genuine or whether it was a face saving measure to avoid admitting that you lost the argument but that is not really important now.

Scofflaw likes to take a certain position on things.

Let me clarify my position, which is at least two-thirds disagreement.

4 pages and what, 10 posts in you're still having to explain what your position actually is? Brilliant.:D

The key thing Ireland could learn from Iceland is that Iceland always placed its own interests ahead of the interests of others. In Ireland, the reverse was true. Obviously Ireland and Iceland had different technical options, benefits and drawbacks but Ireland was never interested in working towards its own best interests.

Scofflaw

Sand wrote: »

Scofflaw likes to take a certain position on things.

It wouldn't make for much of a discussion if I didn't!

Sand wrote: »

4 pages and what, 10 posts in you're still having to explain what your position actually is? Brilliant.:D

Heh. Something like 2000 posts and 200 pages into the Creationism thread, I was still having to explain my position. Could still be doing so, if I wanted.

Sand wrote: »

The key thing Ireland could learn from Iceland is that Iceland always placed its own interests ahead of the interests of others. In Ireland, the reverse was true. Obviously Ireland and Iceland had different technical options, benefits and drawbacks but Ireland was never interested in working towards its own best interests.

I'm so sure that's unquestionably true it's surely not worth asking you for actual proof.

amused,
Scofflaw