Interesting article about Iceland, which let its banks fail instead of bailing them out. Creditors for the banks had to take their losses and the taxpayers didn’t have to foot the bill. Iceland’s government took a hit and their economy went way down, but they’re apparently on their way back up.
Ireland, on the other hand, has a government that, like the US, wants its taxpayers to pay for the banks’ criminal, stupid, and/or reckless behavior. Iceland’s public debt, while high, is still manageable. Ireland has taken on debt that is 12 times – 1200% for those who like big percentages – of its GDP. This is known in economic circles as “unmanageable.”
While the USA has a big enough GDP to absorb the calamities of 2007-2008, will it be able to manage things if there is another banking crisis? It might happen… Click that last link for a paper on how the underlying fundamentals of the banking system remain reckless, stupid, and, yes, criminal.