Tuesday, Aug 18, 2009
Iceland
MarketOracle: Why Iceland and Latvia Won’t Re-Pay the E.U. Credit Crisis Debts
I couldn't agree more with this article. What is happening in Iceland is a disgrace and equivalent to state organised theft. We just watch but actually we are next in line. Hopefully the Icelanders will hold their nerve and tell the UK and Holland(?) to get stuffed. The simple fact is that taxpayers don't have to honour the false gains of ponzi schemes and fraud, the Icelanders are suffering an extreme version of this because it isn't possible for them to pay up anyway. The fake gains are such they are totally disproportionate to the size of their whole economy. Anything ring a bell?
Posted by stillthinking @ 12:41 AM (978 views) Add Comment
17 Comments
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1. stillthinking said...
I have no intention of personally paying off any of the fake gains in the UK and I suggest you all adopt a similar attitude. I think but of course as usual there is no evidence, that ultimately people with skills are going to leave this country for greener grass elsewhere. There is nothing here but excess debt for the taxpayer, in whatever form it gets extracted. For all the talk of Iceland's gross debts, we don't even know what ours are apart from the fact that they are growing rapidly and that all foreign buyers of gilts sold out of the UK, and our currency collapsed 25% off value. I thought the line about the rapid growth in the standard of living for Iceland transpired to be debt financing particularly scary.
2. drewster said...
The Financial Times printed a shorter version of this article:
Financial Times: Iceland’s debt repayment limits will spread
"Can Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings."
3. uncle tom said...
When self important writers litter their articles with silly terms like 'neoliberal' and 'kleptocracy' I tend to stop reading.
Iceland's debt to the UK and Netherlands amounts to about a third of their GDP. Prior to this economic calamity, their public debt was quite low, some 23% of GDP.
It appears to be entirely feasible for Iceland to convert the debt that arose from their failure to manage their banking industry into a sovereign debt issue, and to meet the cost of servicing that debt.
However, should it prove too onerous to meet that service cost, they would retain the option of letting inflation devalue their obligations.
The situation in the Baltics is more complex. There, the option to debt default is looking increasingly attractive.
4. Sharpe said...
The UK has frozen assets of Iceland (using anti terror laws) - so it is difficult to renege on their obligations.
For those Icelanders feeling bad about being classified as terrorists - I would say they are far worse - having screwed countless pensioners, charities and local authorities out of their millions. Countless UK civilians will die in the fall in services that result from this theft - much worse than any Bin Laden
5. the number cruncher said...
Uncle Tom
Are you saying it is right for the state to pay for the sins of the dodgy bankers and turn private debt in to public debt. That sounds like privatising the profits and socialising the losses to me.
I would be interested in your moral stance?
I favour a free market solution. Make tough anti lobbying laws to stop this in the future and increase the personal liability of company directors and shareholders both for criminal and civil actions.
If bankers think there is no repecusions to thier dodgy dealings they will do it again and agian
6. Peter Hun said...
Iceland's banks are NOT private entities, they were sold (with fake loans from other corrupt Icelandic banks) to friends of the government and ex-state employees switched to then banks transparently. The entire edifice was a organised crime ring between government members and the banks.
There is no separation between banks and the government, the government explictly added its guarantee to the Icesave depositors. A Icelandic government minister was quoted in a British magazine saying 'British depositors can be safe in their deposits in Icesave, the Icelandic government guarantee's it'.
If the Iceland wants out of its debt, it can default. But I doubt it will the actual figures are not really that high - they simply want to avoid paying it, like running out of a restaurant without paying.
7. uncle tom said...
number cruncher,
I think the Icelandic people should look very hard to see where the money went, how it was lost, and how much might be recoverable.
They were foolish enough to bask in the glory of their banking prowess without asking some fairly basic questions like 'what the hell is going on here?'
Should the savers take a haircut for choosing the best savings rate without due diligence? Morally, probably yes.
Should prudent British taxpayers who avoided smelly outfits like Icesave have to cough up? Morally, no, although we have to take responsibility for the actions of the BoE and FSA, neither of whom have really shone over this matter.
Ultimately, the Icelandic people cannot maintain their banking sector was nothing to do with them - so the buck stops with them.
8. uncle tom said...
PS - Don't forget that the Icelandic government supported its banks with state guarantees.
9. the number cruncher said...
Uncle Tom
I feel no obligation to British bankers for their misdeeds and I think Icelandic people have the same moral right as myself.
One the 'projects' I manage has just lost an excellent Icelandic employee forced back home due to Government cutbacks. What the hell did she know about dodgy bankers in cahoots with dodgy politicians and why should her career be ruined by these shysters.
Im still interested on your moral view of privatised profits and socialised losses. Our is it collective guilt for private greed?
10. the number cruncher said...
Uncle Tom
I feel no obligation to British bankers for their misdeeds and I think Icelandic people have the same moral right as myself.
One the 'projects' I manage has just lost an excellent Icelandic employee forced back home due to Government cutbacks. What the hell did she know about dodgy bankers in cahoots with dodgy politicians and why should her career be ruined by these shysters.
Im still interested on your moral view of privatised profits and socialised losses. Our is it collective guilt for private greed?
11. icarus said...
Why did the G20 quadruple IMF funding to $1 trillion earlier this year? This was just another branch of the bank bailout industry. In order that banks don't have to write off loans to countries crippled by those loans (made in foreign curencies, not for productive investment but for housing bubblewealth) the IMF steps in and makes them more indebted but, crucially, able to keep servicing their loans, which are collateralised with public wealth in property, facilities and utilities. In essence, more dodgy assets on banks' books are kept in the 'not-yet-defaulted' limbo. This is the situation that MH in this article sees as coming to a head.
12. Gordiji said...
uncle tom @ 5, should the savers take a haircut.... ? morally yes.
I'm surprsed at your stance.Savers are generally unsophisticated investers and should be forgiven absolutely for thinking their money is safe in the bank,especially when even the best rate is a miserable few %/yr.Its not the stockmarket or the roulette wheel.The failures that occur should be landed at the feet of the institutions that decide and allow banking to operate openly or covertly with loan to deposit ratios greater than 100%.Micheal Hudson certainly strikes me as a reasonable and informed commentator, and his views on(against) the creation of a ' toll booth ' similarly strike me as being utterly sane.
13. icarus said...
UT @6 says that the Icelandic government supported its banks with state guarantees. But if you read past the point where the writer introduces the words UT dislikes you'll see that the claim is that Brown and Darling closed the Icelandic banks summarily and without following agreed procedures and thus made it impossible for the banks to recover the deposits which they had lent out (or which the kleptocrats running the banks had lent to themselves).
14. uncle tom said...
"Im still interested on your moral view of privatised profits and socialised losses"
By giving their banks state guarantees, the democratically elected government of Iceland effectively endorsed that scenario.
More fool them. They doubtless thought that such a strategy was the smart thing to do, and would bring prosperity to their island, but were wrong. It was an incredibly reckless move, given the banking numbers, and the miniscule population.
But having made their bed, they now have to lie on it - why should anyone else pick up the tab?
15. d'oh said...
UT@12.32pm
The problem is that one has very little control over the decisions of one's government...especially when all major parties probably would have done the same thing. The awful thing about this mess is that quite a few people clearly saw it coming 5, 6, 7 or 8 years ago (or even 12 if you happen to be Fred Harrison) , but there was no effective channel within which to raise a public debate. Just look at the media ramping of the past 7 years and how anyone who expressed the faintest hint of negativity on TV was just shut down by the presenters and other "experts". Look at how people like Roubini and Peter Schiff were treated on Bloomberg prior to the disaster. I'm also sure letters to the editor would not have been published either. The public aren't given the information to make rational decisions. If anything they are continuously pointed in the wrong direction. It takes a certain contrary type of individual not to be swept away by overwhelming public (and government) claims of "everything is just rosy", and it has been like this antiquity (cf.. the story of Cassandra).
Well, I expect that the end result of this, when it is all over, is that there will be a new generation who remembers the lessons my grandparents learnt in the Great Depression. Sad that humanity has to keep learning the same painful lessons over and over again.
16. Cynical_man said...
This will all happen again in 20 years time (Average financial memory).
http://video.google.com/videoplay?docid=7233622324068640582&ei=fOOCStDjBNef-Ab4s_ncDQ&q=crash+of+1929
17. techieman said...
"12. Gordiji said...
uncle tom @ 5, should the savers take a haircut.... ? morally yes.
I'm surprsed at your stance.Savers are generally unsophisticated investers and should be forgiven absolutely for thinking their money is safe in the bank,especially when even the best rate is a miserable few %/yr.Its not the stockmarket or the roulette wheel."
My advice is not to be surprised. The £50k guarantee is a fudge which encourages saving institutions to throw the dice since they are assured of the deposits - NR and BB spring to mind. The guarantee allows the banks to do what they want because people have no incentive to reign in the banks excesses (and are encouraged to do so by the shareholders). Thats what happened with the S&Ls and thats what happened here. CDOs CDS SIV ABS MBS etc etc - all chasing the highest yield by slicing and dicing because investors wanted that and the cannon fodder for it in the first instance is the savings.
Once you have embarked upon a guarantee scheme - (and very few know exactly when - if they did it probably wouldnt happen) sooner or later what has happened is bound to happen.
IF you accept that - then why oh would should i as a tax payer pay for "unsophisticated" savers who are sophisticated enough to know the "best buy" rate to toodle offshore without the guarantee in search of a few extra basis points - and want me to help em out when it goes t1ts up? Sorry the rules of the game are the rules - the fact that this government has - without my say so - changed them rules are what should really p1ss us off.
The FCSC is funded by the banks - although currently with a massive loan from the Treasury, so the guarantee is i suppose funded by the banks (that itself is unfair as the "good" banks have to pay twice - once for losing customer because they are undercut by - by definition - banks that provide uneconomic rates, and secondly because they have to pick up the tab.