A few years back I got a lot of grief from commenters who contested my claim that it was not clear whether Iceland was obligated to cover the deposits losses of Icesave in Britain and the Netherlands.  Now the EFTA has ruled in Iceland’s favor:

Iceland unexpectedly won its legal battle to avoid being forced to pay back the British and Dutch governments for not honouring deposit guarantees for savers in Icesave.

The EFTA (European Free Trade Association) court on Monday dismissed all claims against Iceland, ruling that it had not breached the deposit guarantee directive because Iceland’s financial crisis was so big. It also held that Iceland had not discriminated between depositors in its own country and those in the UK or Netherlands.

Iceland reacted with relief after government officials had long been prepared for a defeat. “It is a considerable satisfaction that Iceland’s defence has won the day in the Icesave case; the EFTA Court ruling brings to a close an important stage in a long saga,” the government said.

The case arose after Landsbanki, the now collapsed Icelandic bank, attracted thousands of savers in the UK and Netherlands by offering high-interest accounts in Icesave.

Iceland had a bank deposit scheme in place at the time of its crisis, but the scheme did not have sufficient funds to pay out to depositors. After Landsbanki’s demise the British and Dutch governments paid the deposits of the savers themselves, and then demanded the money back from Iceland.

The Icelandic public twice rejected those demands in referendums, in part due to popular anger at how the UK in particular had behaved by using antiterrorist legislation in the dispute.

Iceland has nonetheless been repaying the British and Dutch governments. Officials in Reykjavik said Iceland has paid IKr585bn ($4.55bn) of the IKr1,166bn claims from Icesave, equivalent to more than 90 per cent of the minimum deposit guarantee the two governments were obliged to pay.

“It is expected that the Icesave claims will be paid out in full by the actual debtor, the estate of the failed Landsbanki,” the Icelandic government confirmed on Monday.

You don’t need DSGE models to understand business cycles, it’s basically just a game of musical chairs.  Nominal wages are very sticky and NGDP is very volatile. So when NGDP falls there is less money to pay workers, and rather than taking nominal wage cuts you get lots of workers sitting on the floor—unemployment. Britmouse has a couple graphs that show this pattern for Britain. (Read his post for a full explanation.)  He used NGDP at basic prices net of taxes, which is the funds available to pay workers. Notice that when NGDP plunged in 2008-09, the real wage defined as W/NGDP per capita soared, and so did unemployment. BTW, British hourly nominal wages have been rising at a 2.2% rate in recent years, so inflation is not a problem.  If the CPI number shows high inflation, the problem is supply side, not excessively easy monetary policy.  (Thanks to W. Peden and John Hall who also sent me wage data.)

UK Unemployment Rate. Source: ONS Series MGSX

Here is Ambrose-Evans Pritchard:

The mid-rate of VAT for restaurants and services will jump from 7pc to 10pc. The top rate will rise slightly to 20pc. Spending cuts will plug the revenue gap in order to meet the EU’s 3pc deficit target.

Critics call it the most humiliating U-turn in French politics since François Mitterrand abandoned his disastrous experiment of “Socialism in one country” under a D-Mark currency peg in 1983.

. . . but if it’s a one hit wonder like the Arctic Monkeys—I’ll take it. Claire Jones of the Financial Times did an article about my role in the NGDP targeting movement:

In 2006, rock band the Arctic Monkeys smashed the record for the fastest-selling debut album in the UK without the help of any of the main record labels that dominate the music industry.

The band’s achievement can be compared to Bank of England governor designate Mark Carney floating the possibility of dropping inflation targeting – a cornerstone of economic policy making in many of the big economies – in favour of nominal GDP targeting.

Like the Arctic Monkeys, the growing popularity of this policy was down to the internet’s ability to turn a niche idea into a mainstream success. Monetary policy’s main record label equivalents are the Ivy League universities. Many of the ideas that develop into policy frameworks begin life here, and it is also the place where many of the top-ranking central bankers begin their careers.

However, the revival of interest in nominal GDP targeting owes more to an academic based at the relatively little-known institution of Bentley University in Waltham, a commuter suburb west of Boston.

In 2009, Scott Sumner, a professor at Bentley, set up a blog, the Money Illusion, in frustration at the state of the debate on how monetary policy could be used to cure the US economy’s ills.

“In late 2008, there was a dramatic plunge in demand, the textbook solution to which is monetary stimulus. But people forgot about unconventional techniques,” Mr Sumner told the Financial Times. “I’m not really that well known and so if I’d tried to use the conventional channels, I wouldn’t have had much luck.”

Seriously, I greatly appreciate Ms. Jones’s piece, which gives me more credit that than I deserve.  Lots of other bloggers are also working tirelessly on this project.

Here’s an article from Reason magazine:

Some 18 states permit medical use of marijuana, and in November, Colorado and Washington voted to allow recreational use. Nationally, support for legalization is steadily rising. A decade ago, one of every three Americans favored the idea. Today, nearly half do””and among those under 50, a large majority does.

These trends have diehard drug warriors screaming bloody murder. Former Rep. Patrick Kennedy, D-R.I., has formed a new organization to stop what he imagines to be the “300-miles-per-hour freight train to legalization.” He says that such a change would be especially harmful to teenagers.

Does the name Patrick Kennedy sound familiar?  Maybe this is why:

Rep. Patrick J. Kennedy, who lost control of his car near the Capitol last month in what he says was a drug-induced stupor, pleaded guilty yesterday to driving under the influence of prescription medication and could face 10 days in jail if he fails to comply with a long list of court-imposed conditions.