Comments on: Does Europe need a banking union? Mon, 18 Apr 2016 14:55:08 +0000 hourly 1 By: TobyONottoby Thu, 03 May 2012 15:11:47 +0000 Walt Disney World still outperforming Iceland –

“Smile! . . . With millions of visitors annually, it’s no wonder the Disney parks are among the most photographed places in the United States. On any given day, Disney’s PhotoPass photographers take between 100,000 and 200,000 photos of guests at Walt Disney World Resort. The PhotoPass service allows guests to view, share and order their Disney photos online and create Disney products such as PhotoBooks and mugs.”

From “Walt Disney World Fun Facts”

Iceland tourism booms as currency plummets

“More than 10,500 Canadians visited the country last year, a rise of 68 per cent from 2007, contributing to an overall total of 502,000 tourists in the nation of just 320,000, according to Iceland’s tourism board.”
April 23, 2009

By: TobyONottoby Thu, 03 May 2012 14:43:44 +0000 breezinthru –

Iceland is doing so well that it’s on the verge of becoming a semi-autonomous territory of Canada (  /1140013–iceland-s-loonie-idea-adopting -canadian-currency):

Canada’s dollar and stable banking system look pretty good to some Icelanders these days.

With an election planned in Iceland for the spring of 2013, the future of Iceland’s currency is expected to be an issue, Gunnlaugsson said.

Any move to adopt the loonie would mean giving up control over Iceland’s monetary policy. In effect, it would make Mark Carney governor of both the Bank of Canada and Iceland, with the power to set interest rates and other monetary policies for both countries.

But some Icelanders say the trade off would be worth it if it helped stabilize the economy and attract foreign investment.

“No-one wants our currency. It’s as if you were forced to do business in Disney dollars,” Arsaell Valfells, a professor with the University of Iceland, told The Star in a telephone interview Friday.

Canada’s loonie is a good fit for Iceland because both countries are resource based, so the currency goes up and down with the value of commodities.

For Canada, closer ties with Iceland would increase its influence in the Arctic region, the last frontier for mining, oil and gas exploration, areas where Canada is a global leader.

The impact on Canada’s currency of selling sufficient loonies to Iceland to make the switch would be small, said Doug Porter, deputy chief economist with BMO Capital Markets.

Iceland’s population is just over 300,000 and its economy is less than one per cent of Canada’s.

By: breezinthru Tue, 01 May 2012 11:27:27 +0000 I agree with the article’s conclusion, but I must take issue with one of its premises:

“In some countries, such as Ireland, the lenders have made so many bad loans that they have had to be bailed out – in turn, dragging down their governments.”

The lenders did not have to be bailed out. Iceland declined to bail out their reckless lenders and their economy is now doing quite well.

I would even go so far as to assert that reckless lenders should never be bailed out. It’s ethically wrong and as southern Europe demonstrates, ineffective.

Instead, they should be punished in every conceivable way by their investors, the government and any other party who suffers financial harm. That would, of course, be very painful for the countries in which those banks are located, but so is the effect of the bail out.

The consequences of the American bank bail out and the more recent Eurozone bail out are still fermenting.

By: AlanWatson Tue, 01 May 2012 05:31:44 +0000 Two comments: 1) I think you are too negative on whether European Banking Union could help wean banks off their own government’s debt. It is clear that European governments have insisted on banks and insurers continuing to rate their debt as riskless. (This is why the US government insisted on imposing an otherwise illogical leverage ratio.) If instead the Eurozone were represented on the Basel committee, it might change this. A Eurozone regulator might also impose concentration limits on individual government’s debt.

2) I think you are two positive on the chances for a common resolution regime without a banking union. No country will agree to rules that force it to contribute its taxpayers money to bail out banks, so a common regime will only work with either a central bailout fund (which would effectively require a banking union) or with someone else to pay for the bailout. Europe’s hope has been to bail in bondholders to remove the risk to taxpayers, but the IMF points out in its recent paper on the subject points to the difficulties of introducing such a regime in the current circumstances: ‘For
instance, at the end of 2010, 10 out of 33 of the largest international bankswere refinancing themselves as if they were rated at speculative levels. Higher cost of funding over a long period of time could prompt bank managers to seek riskier assets or simply deleverage. A system-wide bank deleverage could hinder economic recovery.’ In other words, Europe needs to overcome its sovereign/banking crisis before implementing a bail-in regime.

Alan Watson

By: George286 Mon, 30 Apr 2012 18:59:25 +0000 A half solution, the problem is that the basic levers of economic control are not contrlled by a single entity. Taxing and spending and state investment are controlled by individual countries but the European Union imposes requirements for the Euro, thereby controlling individual economic in a Fed-like manner, and by a policy without the representative concern for an individual economy (which should be the job of their individual governments).
The current system is dysfunctional, one goes they all go. The system needs to be tweaked, bring back national currencies and keep the Euro for its advantages, twin currencies, where each country can set its policies with respect to its economy but not drag down their neighbors if they make bad policy. Instead the value of their currency vs. the Euro would go down.

Agree that such basic banking rules should be imposed system-wide as a condition of continued membership of the Euro states, for the reassurance of all investing in other states.