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Source link: http://archive.mises.org/20494/20494/

Iceland’s Meltdown: A Prologue to the Debt Crisis in the U.S. and Europe?

January 16, 2012 by

Gunnar Tomasson is an Icelandic economist now living in the U.S. and a former senior staff member of the IMF from 1966 to 1989. Mr Tomasson is a refreshingly unorthodox thinker, although by no means an Austrian. In a February 2009 Mises blog, I posted a television interview with Mr. Tomasson in which he questioned the equilibrium foundations of modern econmic theory and its usefulness for solving real-world economic problems. Partly as a result of my blog, Mr. Tomasson was recently interviewed on television on the causes of the Icelandic financial meltdown and its implications for the current U.S. and Euroland debt crises. In his latest interview he again challenges the relevance of general equilibrium theorizing and takes a strong position against continuing deficit financing and central bank fiat money creation as a solution to these problems. He even hints that nothing short of sovereign debt repudiation will finally resolve the global crisis. You can view the two segments of this interview here and here.

{ 6 comments }

bill wald January 16, 2012 at 7:03 pm

Or WW3 would solve the the short run economic problem.

RTB January 16, 2012 at 9:43 pm

How does building tanks, guns and bombs to destroy cities and kill people make us better off in any run? We can’t eat bombs, can’t live in rubble heaps and we’ll miss our friends and loved ones.

Daniel January 17, 2012 at 12:01 am

He’s always here and is always saying stupid shit

Replying to him is about as useful as replying to a brick wall

integral January 17, 2012 at 2:51 am

That’s a slander against brick walls.

♥♥♥toCommentYourBlog January 17, 2012 at 11:18 am

The way I see it all economical activity is about extracting free energy from the environment. We then use it to have fun, some now or more later. It is all about extracting more energy than what you have consumed in the process. So think about how much labor you invest in working a field, it has to be smaller than what you can obtain by working it as opposed to leaving it to grow whatever at random and gathering berries. Then same for tools, you invest energy in creating them, and they have to cost less energy than the difference between having them and not, otherwise they would not be viable and sustainable. And we can go on and on about whatever advancements human society has achieved. So, profit and interest can be described as the excess energy output of an activity.
So Gunnar talks about how you need to create more debt to account for interest and profit, or to extract the two out of the economy. But real wealth is created out of free energy, pretty much out of thin air, so how do we get the money system to reflect this? Some super high level commodity money defined as a basket of goods, periodically reviewed to reflect floating exchange rates between different goods and services. This is the first thing that comes to mind, but I want to mention I did read about such a concept in a wikipedia article.

Mitch Kordonowy January 18, 2012 at 2:25 pm

I get very skeptical when someone starts talking about energy and economics.

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