Iceland government fails to socialize Iceland banks losses

“Iceland has come through this surprisingly well,” said Lars Christensen, chief analyst at Danske Bank A/S in Copenhagen. “2009 was a defining year for how the crisis developed. The euro-zone countries took a step in the wrong direction by loosening their fiscal policies. Iceland didn’t do that because its only option was to tighten fiscal policies. Two years later, Iceland has moved quite a way away from its troubles while Greece is trying to unwind what it did Bloomberg

How did Iceland get away with it?

The Icelandic government had a relatively healthy balance, with sovereign debt of 28% of GDP and a budget surplus of 6% of GDP (2007).[91] Debt is now 90% of GDP and Iceland has a budget deficit.[92] Wiki

Iceland had spare debt capacity, enough capacity to get them through. Not any more, but their government was less dependent on the banker.

Ronald Reagan and lil Bush started us down the path of using debt capacity early and often, until we had none left. Jerry Brown and the Dills Act was a real restriction on sovereign capacity, and probably should be included in the list of economic disasters. Gray Davis and the $40 billion energy catastrophe he created didn;t help.

What is the fundamental rule of US politico-economic disaster? Large states with much diminished democratic rights in DC. California and Texas, either give them democratic rights or give them independence. California can force a federal default on its own, and can do it much faster with help from Texas.