
A Letter from Iceland: A World without Money - tortilla
http://www.ft.com/cms/s/0/66c87994-aec1-11dd-b621-000077b07658.html?nclick_check=1
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jgranby
Use this link to bypass the "register to read the whole article" rubbish:

[http://www.ft.com/cms/s/0/66c87994-aec1-11dd-b621-000077b076...](http://www.ft.com/cms/s/0/66c87994-aec1-11dd-b621-000077b07658,Authorised=true.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F66c87994-aec1-11dd-b621-000077b07658.html%3Fnclick_check%3D1&nclick_check=1)

~~~
tortilla
This should work:
[http://www.ft.com/cms/s/0/66c87994-aec1-11dd-b621-000077b076...](http://www.ft.com/cms/s/0/66c87994-aec1-11dd-b621-000077b07658.html)

~~~
pasbesoin
Gave me only the first two paragraphs. jgranby's link, above, gave me the
whole thing.

~~~
ars
I had the opposite result - tortilla's link worked, jgranby's didn't.

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tptacek
You can watch this whole thing play out, and see how it ends, if you read
about the Argentine bank crisis:

<http://en.wikipedia.org/wiki/Argentine_economic_crisis_>(1999–2002)

(I have friends in Buenos Aires, which is for some reason a security hacker
hotbed).

In some ways I can think of, Iceland is much better off than Argentina was;
Iceland is the victim of a short-lived failure of financial engineering, while
Argentina's bank run was caused by long-term systemic corruption and
unemployment.

~~~
davidmathers
Tyler Cowen says "I genuinely cannot imagine what the endgame looks like."

[http://www.marginalrevolution.com/marginalrevolution/2008/10...](http://www.marginalrevolution.com/marginalrevolution/2008/10/iceland-
what-do.html)

Since you can see how it ends you should explain it to him.

~~~
tptacek
Did you notice all the references to Argentina in the comments for that post?

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Brushfire
This is, by far, one of the best written articles I have read in a long time.
Thanks.

~~~
ChaitanyaSai
It surely is well written, but distilled to its essence, here it is: Our banks
collapsed and our credit cards stopped working. Bad banks!

So there's no real subsistence crisis yet? I wish there was about how the
people who were hit the hardest were coping, but then again I remember that
Iceland's population is less than half that of Boston and wonder how much more
press coverage they are getting relative to their population size. Now why a
population of 320,000 would elect to face these coming hardships by hunkering
down and not moving to a more diversified and larger economy, that is
fascinating and the author does speak about the cultural roots responsible for
that attitude.

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crabapple
there's plenty of money in the world, just no value. any government can print
up a trillion dollars. we have half a quadrillion dollars in total outstanding
global debt (all govt, private, hedged, and derivative-based debts)...one must
wonder when global citizenry will awaken to the fact that global fiat
currencies are all converging at worthlessness simultaneously

~~~
ars
Sigh, this stupid meme again.

Fiat money is backed by something - the majority of the time it's backed by
real estate, or other real property.

Fiat money allow the value of property to be represented as cash.

If I build a house there is more value in the world, so there should be more
paper money too - without affecting inflation. This is what happens with fiat
money.

On the other hand if we use gold, then if I create value - a house - you can't
also create more gold to match it, so instead I just deflated the value of the
gold (i.e. the ratio of value of real propery vs the value of all the gold
just changed) - that's bad.

Gold money does not, and can not work unless you are in a static economy. Fiat
money works in both cases.

Please spread the news: the anti fiat money/anti federal reserve/anti
fractional reserve banking meme's are dead.

~~~
byrneseyeview
_Fiat money is backed by something - the majority of the time it's backed by
real estate, or other real property._

Does that mean I can redeem my dollar for a specific amount of land or real
property? Or do you mean it's 'backed' by such property to the extent that I
could trade it for such property, maybe -- in which case the value of
everything I own is 'backed' by a diversified portfolio consisting of
basically every other asset in the universe.

 _Fiat money allow the value of property to be represented as cash._

Any currency allows this. If you have a currency backed by gold, or barrels of
oil, or heroin futures, you can represent the value of a house in terms of
that currency. In fact, you can represent the house as a single unit of a
currency denominated in houses.

 _On the other hand if we use gold, then if I create value - a house - you
can't also create more gold to match it, so instead I just deflated the value
of the gold (i.e. the ratio of value of real propery vs the value of all the
gold just changed) - that's bad._

Why is a declining real price level bad? It rewards saving, keeps interest
rates low, and makes people want to accumulate productive assets rather than
natural resources, property, or other hedges. Also, why do we trust people not
to print up more fiat money? I can certainly trust gold miners not to 'print'
up more gold -- the market is just too inelastic.

 _Please spread the news: the anti fiat money/anti federal reserve/anti
fractional reserve banking meme's are dead._

I'm sorry the meme is are dead. It has lasted a surprisingly long time, what
with the long history of governments' responsible stewardship over printing
presses, banking systems, and the like. Why on earth would anyone think that a
fiat system does anything other than adjust, like clockwork, to the size of
economy? Why doesn't someone just tell them that $1 in 2008 can buy about as
much real estate, food, or clothing that $1 in 1908 could?

The dollar is a pretty stable currency, and it hasn't faced any serious
crises. So shouldn't its ability to hold most of its value be a great argument
in favor of fiat currency? I bet people would even consider your ideas
sensible if the dollar had only lost a modest amount of its value -- 5%, 10%,
maybe 15%. So, __ars __, how well has our tailored-to-the-economy, modern,
anti-meme fiat currency done during that time period?

~~~
lackbeard
_It rewards saving, keeps interest rates low, and makes people want to
accumulate productive assets rather than natural resources, property, or other
hedges._

People won't accumulate productive assets, they'll horde money, which will
contribute further to declining prices. This will put an economy into a
deflationary spiral.

