Iceland Shows Other Europeans How to Survive Bankruptcy

Greece’s Prime Minister Alexei Tsipras – June 5, 2015

Taxpayers in Europe (and the United States) who have been terrorized since 2008 by government officials warning about economic armageddon, catastrophe, and pestilence should look to tiny Iceland for a taste of how little there is to fear when the experts can’t save the people.

Christine Lagarde, managing director of the International Monetary Fund, recently branded Iceland’s economic performance “impressive.” In the last few years the small island in the north Atlantic has managed to shrink its deficit, reduce unemployment, and allow its economy to grow. [ Well, that means the IMF’s “austerity” reforms don’t work ]

Meanwhile, on mainland Europe, there is hardly any economic growth to be seen, and countries that pledged to make necessary austerity reforms have almost certainly failed to do so.

Government growth, fiscal activism, and national resentment are the norm. Officials from the eurozone have been trying to help heavily-indebted nations like Greece, Portugal, and Italy avoid banking-system collapse and exit from the single currency. Were they to examine Iceland’s example they might find that temporary financial collapse and monetary sovereignty provide a better roadmap to economic recovery than bailouts backed up by unpopular and unenforceable “austerity” conditions.

Iceland, like the rest of Europe, was faced with an almost unprecedented economic situation in 2008. Iceland’s central bank tried to rescue some of the country’s largest banks, bankrupting itself in the process. Iceland’s largest banks held almost 10 times Iceland’s GDP in assets (much of it foreign) in 2008. The central bank was forced to attempt the rescue after agreeing to guarantee future bailouts in 2001. With the central bank out of commission and a crippled financial sector, Iceland’s GDP took a nosedive.

Because so many of the assets held by Icelandic banks were foreign, the diplomatic fallout was almost as severe as the economic one. The British prime minister at the time, Gordon Brown, invoked anti-terrorism legislation in a bid to freeze assets of one Icelandic bank in the United Kingdom.

[But who are the real terrorists in this case: IMF, British Prime Minister, the European Central Bank, and the European Union? ]

 Iceland’s GDP per capita (in current U.S. dollars) was a little over $65,500 in 2007; in 2009 it was almost $38,000. It would be cruel to overlook the effect a sudden loss in wealth like this had on the average Icelander’s economic well-being. Having investments you thought were safe vanish is unfortunate at best and tragic at worst. However, the economic future of young Icelanders will almost certainly be substantially better than that of their peers in Greece.

Icelanders will do better than Greeks precisely because financial institutions collapsed in Iceland, ironically in part because of mechanisms in place requiring bailouts from the Icelandic Central Bank. Economic collapse allowed for proper refinancing. Greece has suffered from too much attention, and because of all of that attention, the actual size of the Greek economy has been forgotten.

Greece’s GDP is roughly the size of Maryland’s, about $300 billion. The eurozone as a whole has a GDP of almost $12 trillion. Figures like these only highlight the strictly political motiviations behind the attempted rescue of Greece by the rest of the eurozone. Certainly, a Greek exit from the eurozone would be a major event. However, Iceland’s example shows that letting financial institutions fail allows for strong and comparatively quick recoveries following a period of economic hardship.

Unsurprisingly, government attempts to fix the European financial crisis have made the situation worse and humiliated the most affected countries the most severely. Had Greece been left to default on its debt and leave the eurozone early, the effects, economic and political, would have been much less dire in comparison to the effect of a Greek exit now. What is forgotten about the example of Iceland is that although the initial international reaction to Iceland’s collapse was anger, the country’s reputation recovered. The animosity brewing between the Greeks and other Europeans (especially Germans) will not diminish within a matter of months. Too often the cultural changes that are happening in Europe are overshadowed by the economic fiasco.

The comparison between Greece and Iceland is not perfect. If Greek GDP, at $300 billion, puts it on par with the Old Line State, Iceland’s, at just $15 billion, puts the island nation below even Vermont, the U.S. state with the lowest GDP. But so what? The economic stagnation caused by Too Big To Fail, of which the Euro “crisis” is only the most monstrous example, resulted from policymakers believing that the same math you know to be true at the local level does not apply at the macro level. The central bankers are wrong about that, and the example of Iceland provides Greece and the rest of mainland Europe with a valuable example.

Unfortunately, it looks like it will be a lesson learned in hindsight. How severe the effects of fiscal and monetary activism will be on the eurozone will depend in part on how quickly continental policymakers can abandon their political agenda and focus on the economics.  

Remembering Kurt Cobain: Why People Kill Themselves

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With the 21st anniversary of Kurt Cobain’s on April 5, we’d like to celebrate the musician’s vast contributions to music and popular culture.

Cobain was featured on the cover of Newsweek’s April 18, 1994, issue as part of a larger story about the root causes of suicide. From “The Mystery of Suicide,” by David Gelman:

The road to self-destruction starts with depression and ends in the grave. But who chooses to die and why? Is it stress? Brain chemistry? A despair rotting the soul? The answers are as varied as the weapons.

kurt-cobain-e1396621300826            The body of Kurt Cobain as found by police.

Gelman spoke to Seattle locals about Cobain’s too-early passing. College student Chris Dorr, 23, found it almost clichéd: “It makes you wonder if our icons are genetically programmed to self-destruct in their late 20s.”

Below is the 1994 eulogy, a feature that ran alongside Gelman’s story.

The Poet of Alienation: Cobain’s corrosive songs defined a generation

He’d come to install an alarm system. The irony is that long before electrician Gary Smith found Kurt Cobain’s body, it was clear that what Nirvana’s singer really needed protection from was himself. Cobain wasn’t identified for hours, but his mother, Wendy O’Connor, didn’t need anyone to tell her that it was her son who was found with a shotgun and a suicide note that reportedly ended, “I love you, I love you.” The singer had been missing, and his mother had feared that the most troubled and talented rock star of his generation would go the way of Jim Morrison and Jimi Hendrix. “Now he’s gone and joined that stupid club,” she told The Associated Press. “I told him not to join that stupid club.”

Cobain didn’t overdose like Morrison and Hendrix, of course. But the singer’s self-destruction streak seems to have been bound up inextricably with drugs. In March, while in Rome, Cobain overdosed on painkillers and champagne. Nirvana’s spokespeople insisted that it was an accident, portraying Cobain and his wife, Courtney Love, as stable, happy parents whose drug days were behind them. But the truth about Cobain’s last months was far messier than we’d been led to believe.

On March 18, Cobain reportedly locked himself in a room of his spacious Seattle home and threatened to kill himself; Love is said to have called the police, who arrived on the scene and seized medication and firearms. On April 2, the police were summoned once more—this time by O’Connor, who told them her son was missing. The rumor mill has it that Cobain and Love’s marriage was on the rocks, that his friends performed an “intervention,” and that while Love was promoting a new album by her band, Hole, Cobain was fleeing a rehab clinic in Los Angeles.

According to the AP, O’Connor’s missing person’s report read, in part, “Cobain ran away from [a] California facility and flew back to Seattle. He also bought a shotgun and may be suicidal.” All these dark machinations will make for an uneasy legacy—precisely the sort of legacy he didn’t want. “I don’t want my daughter to grow up and someday be hassled by kids at school,” he once said of Frances Bean Cobain, then 19 months. “I don’t want people telling her that her parents were junkies.”

Which raises a question: What will they tell Frances Bean? Where her father’s career is concerned, at least, the answer is reassuring. They’ll tell her Cobain and his band hated the slick, MTV-driven rock establishment so much they took it over. They’ll tell her that with the album Nevermind, Nirvana replaced the prefab sentiments of pop with hard, unreconstituted emotions. That they got rich and went to No. 1. That they were responsible for other bands getting rich and going No. 1: Pearl Jam, Soundgarden, Alice in Chains. That Cobain never took his band as seriously as everyone else did—that he once wrote, “I’m the first to admit that we’re the ’90s version of Cheap Trick. But that despite his corrosive guitar playing, he wrote gorgeous, airtight melodies. That he took the Sex Pistols’ battle cry “Never Mind the Bollocks,” mixed it with some twenty-something rage and disillusion, and came out with this lyric: “Oh, well, whatever, never mind.” And, finally, that he reminded his peers they were not alone, though all the evidence suggests that he was.

Cobain was born just outside the desultory logging town of Aberdeen, Wash., in February 1967. (Yes, he was 27, as were Morrison, Hendrix and Joplin.) The singer hated being the crown prince of Generation X, but the fury of Nirvana’s music spoke to his generation because they’d grown up more or less the same way. Which is to say, grunge is what happens when children of divorce get their hands on guitars. Cobain’s mother was a housewife; his father, Don Cobain, was a mechanic at the Chevron station in town. They divorced when the singer was 8.

Drugs and punk: Cobain always had a fragile constitution (he was subject to bronchitis, as well as the recurrent stomach pains he claimed drove him to a heroin addiction). The image one gets is that of a frail kid batted between warring parents. “[The divorce] just destroyed his life,” Wendy O’Connor tells Michael Azerrad in the Nirvana biography Come as You Are. “He changed completely. I think he was ashamed. And he became very inward—he just held everything [in]…. I think he’s still suffering.”

As a teen, Cobain dabbled in drugs and punk rock, and dropped out of school. His father persuaded him to pawn his guitar and take an entrance exam for the Navy. But Cobain soon returned for the guitar. “To them, I was wasting my life,” he told the Los Angeles Times. “To me, I was fighting for it.” Cobain didn’t speak to his father for eight years. When Nirvana went to the top of the charts, Don Cobain began keeping a scrapbook. “Everything I know about Kurt,” he told Azerrad,” I’ve read in newspapers and magazines.”

The more famous Nirvana became, the more Cobain wanted none of it. The group, whose first album, 1989’s Bleach, was recorded for $606.17 and released on independent label Sub Pop, was meant to be a latter-day punk band. It was supposed to be nasty and defiant and unpopular. But something went wrong: Nirvana’s major label debut, Nevermind, sold almost 10 million copies worldwide. On the stunning single “Smells Like Teen Spirit,” Cobain howled over a sludgy guitar riff, “I feel stupid and contagious/Here we are now, entertain us.” This was the sound of psychic damage, and an entire generation recognized it.

Nirvana—with their stringy hair, plaid work shirts and torn jeans—appealed to a mass of young fans who were tired of false idols like Madonna and Michael Jackson, and who’d never had a dangerous rock ‘n’ roll hero to call their own.

Unfortunately, the band also appealed to the sort of people Cobain had always hated: poseurs and bandwagoneers, not to mention record company execs and fashion designers who fell over themselves cashing in on the new sights and sounds. Cobain, who’d grown up as an angry outsider, tried to shake his celebrity. “I have a request for our fans,” he fumed in the liner notes to the album Incesticide. “If any of you in any way hate homosexuals, people of different color, or women, please do this one favor for us—leave us the f—k alone!… Last year, a girl was raped by two wastes of sperm and eggs while singing…our song ‘Polly.’ I have had a hard time carrying on knowing there are plankton like that in our audience.”

By 1992, it became clear that Cobain’s personal life was as tangled and troubling as his music. The singer married Love in Waikiki—the bride wore a moth-eaten dress once owned by actress Frances Farmer—and the couple embarked on a self-destructive pas de deux widely referred to as the ’90s version of Sid and Nancy. As Cobain put it, “I was going off with Courtney and we were scoring drugs and we were f—king up against a wall outside and stuff…and causing scenes just to do it. It was fun to be with someone who would stand up all of a sudden and smash a glass on the table.”

In September ’92, Vanity Fair reported that Love had used heroin while she was pregnant with Frances Bean. She and Cobain denied the story (the baby is healthy). But authorities were reportedly concerned enough to force them to surrender custody of Frances to Love’s sister, Jamie, for a month, during which time the couple was, in Cobain’s words, “totally suicidal.”

Tormented rebel: By last week, the world knew Cobain has a self-destructive kurt-cobain-guitarstreak, that he’d flailed violently against his unwanted celebrity—but the world had been assured that those days were over. Nirvana recently postponed its European concert dates and opted out of this summer’s Lollapalooza tour. Still, spokesmen maintained that Cobain simply needed time to recuperate from the overdose in Rome. They offered a tempting picture: Cobain the tormented rebel reborn as a doting, drug-free father. Even Dr. Osvaldo Galletta, of Rome’s American Hospital, says he believed the overdose was an accident: “The last image I have of him, which in light of the tragedy now seems pathetic, is of a young man playing with the little girl. He did not seem like a young man who wanted to end it. I had hope for him. Some of the people that visited him were a little strange, but he seemed to be a mild sort, not at all violent. His wife also behaved quite normally. She left a thank-you note.”

It’d be nice if we, too, could come away with that image of Cobain and his Kurtand daughterdaughter. And in truth, those who knew the singer say there was a real fragility buried beneath the noise of his music and his life. Still, there are a lot of other images vying for our attention just once. Among them is the image of Courtney Love and Frances Bean Cobain, who are said to have arrived at their home in Seattle, via limo, late Friday. Again: What will people tell Francis? Ed Rosenblatt, Geffen Records president, says, “The world has lost a great artist, and we’ve lost a great friend. It leaves a huge void in our hearts.” That is certainly true. If only someone had heard the alarms ringing at that rambling, gray-shingled home near the lake. Long before there was a void in our hearts, there was a void in Kurt Cobain’s.