As Denmark is now officially the most-personally-indebted nation in the entire world on the basis of debt versus disposable income, at 260%, it's no surprise that they are suffering under the credit crunch. Following on from what happened with the Northern Rock in the UK, Denmark's Roskilde bank went into administration and, taking similar mistaken steps to the UK government, it has been nationalised. What I found most amusing were the Danish central bank governor, Nils Bernsteins' comments about how the "bank was not fit to survive", "shareholders getting no compensation" and finally, how the bank "abused the credit system for breakneck growth without proper regard for social duty".
Well, of course, I agree shareholders of ailing businesses should never be compensated for their risk when things turn bad, just as they should not be taxed when things go well. The major comment of note, and a major insight into the Danish mentality, is the comment on how the bank didn't have proper regard for social duty. Okay, I run my own business, so should I have any regard for "social duty", or do I run the business to make as much profit as I can within the law?
Perhaps Mr Bernstein needs to look in the mirror and question if the Danish central bank and government has been neglecting it's own social duty. In the opinion of old-school economists, the main role of a central bank is to "maintain a strong and sound trusted currency for the citizens of the nation, backed by real assets, for the conduct of trade", and taking that into account, the Danish central bank and government fail, with their ludicrous tax reliefs on any personal loan taken out and the consequent flood of paper money created out of nothing these past ten years or so. The national currency is not something you should play with to win votes or induce a temporary boom.
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