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英国论文网:British and Dutch GDP:The spread of the cri(10)


firms are heavily leveraged; have used borrowing, mostly in foreign currency, to
fund investment and acquisitions. The Icelandic business model appears to have
involved transforming firms into investment funds, be they shipping companies
such as Eimskip (established 1914), airlines such as Icelandair (established in
1943), or fish-exporting companies, to name just a few examples. Exporting firms,
however, are benefiting from lower exchange rates. The future belongs to them.
Lessons
The proximate cause of the economic meltdown in Iceland is the rapid emergence
of an oversized banking sector and the accompanying domestic credit creation,
asset price bubbles and high levels of indebtedness. At this point it is important to
consider the reasons why this was allowed to happen.
Monetary policy technically flawed
A sequence of interest rate rises, bringing the central bank interest rate up from
5.3% in 2003 to 15.25% in 2007 did not prevent the boom and the bubbles that
preceded the current crash. On the contrary, they appear to have fuelled the bubble
economy.
But surely it was apparent to anyone in the latter stages of the boom that it was
driven by unsustainable borrowing and that a financial crisis was fast becoming
inevitable. Iceland would have faced the music soon even in the absence of turmoil
in international credit markets. However, in spite of many observers point-
20 The First Global Financial Crisis of the 21st Century Part II
3 See report by David Ibison in the Financial Times, 24 October 2008, titled ‘Transcript challenges Darling’s claim
over Iceland compensation.’
ing this out4 (including the central bank itself!5), the course of economic policy
was not changed. There were clearly other, more profound, reasons for this inertia
and passivity in the face of peril.
Belief in own abilities and good luck
History is full of examples of nations gripped by euphoria when experiencing rapidly
rising asset prices. During the economic boom it was tempting to come up
with stories to explain the apparent success, such as the notion of superior business
acumen. However, this is a normally distributed variable and its mean does
not differ much between nations. The ability to govern a modern economy is
unfortunately also a normally distributed.
The normal distribution and the division of labour
When there are not too many people to choose from, it becomes doubly important
to pick the best candidate for every job. While the private sector has, as if led
by an invisible hand, a strong incentive to pick the most competent people for
every position, the same can not be said of certain areas within the public sector.
The appointment of former politicians to the position of central bank governor,
to take just one example, reduces the bank’s effectiveness and credibility. The danger


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