A lesson from Iceland: it pays to have your own currency

First off, that comment about depreciation since 1939 - 1939! - is a cheap shot. But what about the comparison with Ireland? It’s true that gross domestic product per capita in Ireland (in this case, using gross national income doesn’t make much difference) recovered to its pre-crisis level only a bit later than Iceland’s did. But G.D.P. isn’t the only indicator, and it’s one that is arguably distorted by the nature of the Irish export sector, which held up fairly well and is highly capital-intensive (think pharmaceuticals) - that is, it contributes a lot to G.D.P. but employs very few people.

If you look instead at employment (see the chart), Iceland did far better than Ireland. Unemployment data in Iceland also shows a much more favorable picture. Less formally, everyone I know who tracked both countries has the sense that the human toll in Iceland was much less severe than it was in Ireland.

And if you remember, everyone expected the Icelandic crisis to be a lot worse, given the incredible scale of the banking overreach - early on, comparisons between the two countries in Ireland were regarded as black humor, not something expected to be taken seriously.

I understand the urge to make excuses for the single currency. But the evidence really does suggest that there are important advantages to keeping your own currency.