A NYT piece from yesterday noted that Greece still may require a forty (!) percent mark-down in wealth/perceived wealth. Measured per capita Greek income is about 30k, for Bulgaria 14k, can Greece really be so much wealthier? It is no wonder that Greek politicians are reluctant to default and/or leave the eurozone. No matter how inevitable such courses of action may be, they are not political winners: “We pledge to cut your standard of living by forty percent, but unlike the other party, we’re going to do it right now!”
It was debated how high the mark-down must be for the United States; there was an estimate of 7-8 percent and another estimate of 3-4 percent. Ireland will have ended up facing quite a large mark-down.
How much of a mark-down has Iceland seen? I mean in terms of wealth not just per capita income. Do any of you know of figures? Their ability to “get their mark-down over with” is one fundamental reason for their turnaround. The loss is large but it is now behind them. Floating exchange rates don’t hurt either. As a quite small, fairly unified, previously used to hardship and bad fermented foods, extremely nationalist self-identifying kind of place, it is no surprise that Iceland has handled the markdown issue so well.
I find it useful to think about places in terms of how well they handle the issue of the wealth mark-down and how quickly they can get it behind them.