It doesn't teach the person getting the mortgage anything about how to properly manage their money and not get in this sort of situation again.
They will just do it again in the future, but with something like credit card debt. This is a huge disservice to their economy.
I also wonder who has to pay for this. If it's the bankers, then it's a scary thing. It means the government pretty much has control over the companies/banks there. If not, then it's coming out of the taxpayer's
I also wonder who has to pay for this.
Actually Iceland's economy is doing pretty well they where the only country to out of hand reject placing the private bank debt onto their tax payers as such the banks folded. I think the mortgage forgiveness is an extension of that, the banks folded due to them not being able to strap the debt to their public. Iceland has held the banks accountable for there abuse of the laws, and there are many cases in which Icelandic bankers where clearly in violation of Icelandic law. Some of this forgiveness is an extension of that, e.g forgiving fraudulent indexed loans and forgiving loans that where appraised by people paid by the banks to give higer appraisals, this link has more info on the subject than the video: http://www.bloomberg.com/news/2012-02-20/icelandic-anger-bri...
Sorta, but I think that's a little garbled. The big question is "should the government guarantee the debts of private banks". The textbook/neoliberal answer is "no, of course not, that would be insane". However, at the behest of the EU, Ireland did exactly that - an unprecedented move which has worked out pretty much exactly how everyone THOUGHT it would: badly.
Iceland, by contrast, went with the textbook answer (the Bloomberg story you link to even says this explicitly) of telling the creditors of private banks to get stuffed. They aren't the first nor yet the hundredth country to do that, and they won't be the last. And it working out fairly well for them, all things considered.
What's unusual here isn't how Iceland has behaved, but how Ireland has behaved. And it's there we should be looking to draw the real lessons about what to do and - more importantly - not do about future bank crises. (The Irish bank debt guarantee may yet prove to be the single silliest decision in the whole European debt crisis. Considering the competition, that's impressive.)
