In the United States, there is an unspoken understanding that an unemployment rate of 5 or 6 percent is acceptable, yet inflation must stay very low—no more than 1 or 2 percent. In Iceland, the reverse is true. If the unemployment rate reaches 5 percent, it’s considered a national scandal. Presidents are booted from office. Yet Icelanders will tolerate a relatively high inflation rate. Why the different approaches? The answer lies in how countries feel about pain, economic pain. High inflation is shared pain; everyone feels the pinch of higher prices when they go to the grocery store or the
...more
