Currency depreciation by no means eliminates the pain of an economic crisis. On the contrary, it makes everyone poorer. But by spreading the shock across all citizens and assets, it does a much smoother job of mitigating the secondary trauma of idleness and unemployment.Read More
Reykjavik, Iceland [photo by Thomas McKibbin]
Clearly, Iceland has taken the utilitarian path of doing what is best for most of its people, which is to depreciate its currency in order to reduce unemployment. In contrast, the US and Europe have generally sought to avoid expansive monetary actions that would likely reduce currency values. In the meantime, the Icelandic experience is instructive for monetary and fiscal policy-makers on both sides of the Atlantic.
Source: Yglesias, M (2012, July 9), Iceland's Success in Battling Joblessness, Slate.