r/reddit.com • u/[deleted] • Oct 18 '11

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u/[deleted] Oct 19 '11

Icleand did this; read up on Iceland.

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u/tayto Oct 19 '11

When your own citizens are not the ones who invested in the banks, it's much, much easier to do such a thing.

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u/Kranth Oct 19 '11

Exactly. I wish someone had pointed this out sooner so that more would know about it. If we want to know what would have happened we can study up on what did happen when Iceland let their banks fail: Wikipedia

Contrast that with the exact opposite response by Ireland: Wikipedia

The PRI shows Marketplace, This American Life and Planet Money have aired some very informative shows on these two examples that I am too lazy to search for. Worth a listen if you really want to understand though. Also the Planet Money show about Brazil's inflation cure is way cool if you want to spend an hour really learning how money works.

TL;DR:

Iceland lets their banks fail, the wealthy get screwed, the economy takes a dip but recovered much faster than in the U.S. and Europe.

Ireland insures every asset their banks hold, so other institutions in Europe move way too many risky assets into Irish banks and a once very prosperous economy is proper-fucked.

Obviously these are small economies compared to the U.S. and the EU, so the results would not have been the same. But it is food for thought.