My MBA class is using Mishkin’s macro textbook, and we are exploring his notoriety as author of an analysis of Iceland’s macroeconomy circa 2006.
The quote of the day, from Thorvaldur Gylfason:
In 2012, senior Central Bank officials testified in the Court of Impeachment hearing of the criminal case brought by Parliament against Iceland’s pre-crash Prime Minister, Geir Haarde, that the writing was on the wall already in 2006. On the stand, one senior Central Bank official likened the operations of the Icelandic banks before the crash to the Ponzi scheme operated by Bernard Madoff in the US. Even so, the Central Bank continued to lend money to the banks without adequate collateral, bankrupting itself in the process. The fiscal cost of recapitalizing the three commercial banks amounted to another 18% of GDP.