Monday, February 20, 2012

Debt forgiveness, will it happen here?

Icelandic Anger Bringing Record Debt Relief in Best Crisis Recovery Story

Massive amounts of private debt has been written down, helping those in debt. The article doesn't mention savers and domestic creditors once. How did they fair, have they received any "help". I guess if you don't own a house you dont count.

Posted by nod2glod @ 12:22 PM (1540 views)
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7 thoughts on “Debt forgiveness, will it happen here?

  • @nod2glod

    I think you comment that “if you don’t own a house you dont count” is too harsh. The article makes it clear that overextended borrowers were still liable for up to 110% of their property value loans i.e. still in negative equity.

    Also, some of the measures would have helped savers with Krona deposits a bit: “Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.” Realistically, this is probably all they could do in the circumstances for those who hadn’t diversified out of Krona (maybe there’ a lesson there …)

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  • general congreve says:

    @1 – True, they at least protected savers accounts in nominal terms. Shame for the savers that the Krona immediately collapsed 69% against the Euro and then suffered another 18% inflation the following year. A lesson there indeed for all you determined sterling deposit savers and STRers.

    “But I’m saving for a house priced in sterling!”, you all say. Well Icelandic property prices (in nominal terms – remember you’re saving in nominal terms if you are in local currency) are only 7.6% below Q1 prices in 2008 when Icelandic property was at peak. So, affordability in local currency has hardly budged for Icelandic HPCers saving in Krona.

    Source: http://www.globalpropertyguide.com/Europe/Iceland

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  • What they probably didn’t mention, is that about 90% of the debt was private debt from international bankers that had nothing to do with any Icelandic person. It is the same situation here and in Greece.

    Bankers have, as in the third world, convinced dictators to assume massive private debts and dump them on the public. Meanwhile, the banker scam artists demand all of the Country’s facilities and assets as collateral. This is a hostile corporate takeover of Western democracies carried out under a fascist framework.

    I hope people understand what it means to live in a tin-pot third world dictatorship run for and by the banksters. You and your children’s children will live under debt servitude and blinding poverty.

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  • mark wadsworth says:

    From the article: “Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.”

    “We own land! Give us money!” or in their case “We own land! Release our debts!”. But if it is true that it is mainly foreign creditors taking the losses, well in that case I’m not too fussed, they’re all as bad as each other.

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  • Been busy, sorry to come in so late.

    From the article :“Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.” Except the ones in the IMF, the EU and the ECB. Argentina in Dec 2001 broke the link between its currency and defaulted on its debt. There were three months of chaos – insolvent banks, savers with no access to their savings, business dealings throw out of kilter – but by the economy started to grow rapidly from the 3rd Q of 2002 and carried on growing until 2008. The IMF clowns had consistently been overly optimistic about Argentina’s economic performance while it “behaved itself” and paid the bankers, and they were consistently overly pessimistic about its performance after it defaulted.

    In Iceland it’s not a question of prudent savers vs profligate borrowers since between the two stood klepto banksters from politically dominant families which own the economy. The banks collapsed in part because the spivs running them gave themselves massive loans, using shares in the banks as collateral (bank A made loans to shareholders in bank B using their Bank B shares as collateral, the loans were used to buy more shares in bank B and to raise the share price, then bank B returned the favour to bank A, as BCCI had done a quarter of a century earlier).

    Iceland is run by insiders and has not had the debt repudiation experience implied in this Bloomberg report. “Iceland’s economy will outgrow the euro area” doesn’t mean much (especially since $250 million pa worth of growth in Iceland equates to 2% growth).

    There was a bad bank – good bank swap in Iceland. Assets and liabilities were transferred from the old/bad banks to the new/good banks – deposits were transferred and mortgages/loans were transferred at a steep discount to reflect writedowns. Shareholders of the old banks were wiped out and bondholders (mainly foreign banks) sold at a steep discount. Buyers of these cheap bonds are hedge funds and owners of the new banks, and most of these are believed to be the same insiders who controlled the old banks. They have behaved like collection agencies which buy debts at 30 – 40% of face value and then hound debtors for the full whack. Not only do they demand 100% but they add a huge amount on for CPI indexing (the currency collapse sent import prices and the CPI soaring). The article claims that loans indexed to foreign currencies are illegal but it doesn’t mention that the government and Supreme Court, with IMF backing, have supported CPI indexation of loan principal ‘so that the restructured banking system can stand on its own two feet’ and ‘to minimise the cost of refinancing the banks’.

    Furthermore the insiders who own the new banks have close links with major companies, so they keep these cash cows afloat by writing down/off claims on these companies while going after householders and small businesses for as much as they can get (they say they lack the resources to give much debt relief to households). Meanwhile they keep these household debts on the books at unrealistically high valuations in order to cash in through the re-sale of newbank equity

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  • 2nd para 2nd line “Argentina in Dec 2001 broke the link between its currency AND THE US DOLLAR and defaulted on its debt”

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  • Greece should take note.

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