The American Right likes to claim that Iceland has seen an economic miracle, partly as a result of tax reform.
The FT reported this yesterday:
Iceland has the highest interest rates in Europe after the central bank raised rates by 50 basis points to a record 15.5 per cent yesterday as it strove to restore confidence in its struggling currency and quench fears of a banking crisis.
Some miracle.
And some indication that abandoning fiscal policy really is a very bad idea indeed.
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So Icelandic Tax Reform didn’t prevent a global credit crisis that originated in the USA from straining Iceland’s currency markets nor did it prevent hedge funds, smelling blood, to move in and start a run on the krona.
Why would it? I paid off my credit card in full last month, but that didn’t stop the global credit crisis from hitting Iceland either.