sharoth7 Posted May 4, 2012 Report Share Posted May 4, 2012 Hello I'm a new one on that forum and I've got one question that u may answer me. What was the cause of insane GDP growth on 2004 in Iceland? Hope to see any answer. Thanks in advance Quote Link to comment Share on other sites More sharing options...
Nicky Posted May 5, 2012 Report Share Posted May 5, 2012 It was mainly caused by heavy borrowing (specifically short term, foreign borrowing). http://www.imf.org/external/np/ms/2004/102504.htm That borrowing (which continued for several more years) was ill-advised. The reason why it was done anyway is that the model the Icelandic financial system is built on is fundamentally flawed. Not because, as socialists would tell you, the market can't regulate itself, but because the market can't regulate a government run financial system. And Iceland's financial system is, and has been all along, government run. The government prints the currency, sets interest rates, is the de facto insurer of banks if they were to fail, has regulatory power over everything, etc. That's not a free market. Not even if the government chose to neglect to watch over what happens with the money they are printing and backing. Quote Link to comment Share on other sites More sharing options...
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