The Financial War Against Iceland

[Green_Bear]

The Financial War Against Iceland: Being defeated by debt is as deadly as outright military warfare.
Tuesday, 7 April 2009, Michael Hudson
scoop.co.nz/stories/HL0904/S00068.htm

Iceland is under attack – not militarily¬ but financially. It owes more than it can pay. This threatens debtors with forfeiture of what remains of their homes and other assets. The government is being told to sell off the nation’s public domain, its natural resources and public enterprises to pay the financial gambling debts run up irresponsibly by a new banking class. This class is seeking to increase its wealth and power despite the fact that its debt-leveraging strategy already has plunged the economy into bankruptcy. On top of this, creditors are seeking to enact permanent taxes and sell off public assets to pay for bailouts to themselves.
Being defeated by debt is as deadly as outright military warfare. Faced with loss of their property and means of self-support, many citizens will get sick, lead lives of increasing desperation and die early if they do not repudiate most of the fraudulently offered loans of the past five years. And defending its civil society will not be as easy as it is in a war where the citizenry stands together in coping with a visible aggressor. Iceland is confronted by more powerful nations, headed by the United States and Britain. They are unleashing their propagandists and mobilizing the IMF and World Bank to demand that Iceland not defend itself by wiping out its bad debts. Yet these creditor nations so far have taken no responsibility for the current credit mess. And indeed, the United States and Britain are net debtors on balance. But when it comes to their stance vis-à-vis Iceland, they are demanding that it impoverish its citizens by paying debts in ways that these nations themselves would never follow. They know that it lacks the money to pay, but they are quite willing to take payment in the form of foreclosure on the nation’s natural resources, land and housing, and a mortgage on the next few centuries of its future

If you read no other article this Sunday, read this entire article, we’re on the same course.

[EireClare]

why oh why did iceland ‘nationalise’ their banks. If they had just allowed them to collapse, the ‘creditors’ (most of whom have hands just as dirty as the banks themselves) would have been wiped out and the state would not be in the intergeneration quagmire they find themselves in now.

I don’t understand it.

We are constantly told ‘if we don’t nationalise our banks our economy will collapse’

Well, our economy already is collapsing, and if we do nationalise the banks, we’re just nationalising their debts which will cripple our ability to recover in the future.

Its a bit like the navy towing a striken nuclear submarine back into their naval headquarters, because its important and if they don’t repair it, it will sink, only to have it explode in a massive nuclear blast, destroying half the country.

[Green_Bear]

That’s why NAMA is a stupid idea. The government is siding with the bankers and piling on public debt while not sharing capital with the taxpayers, this can only lead to a collapse in sustainable economic growth.

[yoganmahew]

That’s why the guarantee is a stupid idea. Our banks have already collapsed. They are already nationalised. The guarantee has seen to that.

[2Pack]

Good article , here is a key part of it . Iceland binged on carry trades …meaning that much of its debt is foreign and only keeps growing as its own currency becomes progresssively more worthless. The banking sectro ( I don’t have external debt stats) was 5x the size of the economy when the currency was worth something . The external debt was at least half teh value of the banking sector I should think.

I also was an advisor to the Canadian government in the 1970s. My main work was to write a monograph explaining why countries should not borrow in foreign currencies, but should monetize their own credit for domestic spending and investment. In recent years I have taught in Latvia and given this same advice to its officials. I provide this background because it has obvious relevance to Iceland’s financial situation today. It has broken the cardinal rule of international finance: Never borrow in a foreign currency for credit that you can create freely at home. Governments can inflate their way out of domestic debt – but not out of foreign debt. That is a large part of the problem that Iceland now faces.

Except that we Irish cannot do this. Any attempt to ‘inflate’ our way out of these matters is punished by queue of cars outside Newry and skangers on every street corner monopolising the cigarette trade…remember the way talbot street was for all of the 1990s .

That should read , governments with sovereign currencies can inflate their way out of domestic debt and then only at the risk of punishing their more prudent and less profligate citizens

[Septic_Crank]

@EireClare

why oh why did iceland ‘nationalise’ their banks. If they had just allowed them to collapse, the ‘creditors’ (most of whom have hands just as dirty as the banks themselves) would have been wiped out and the state would not be in the intergeneration quagmire they find themselves in now.

Because elites everywhere conspire to impoverish their citizenry and identify far more with their international counterparts than with their own citizenry. What looks like a stupid decision is in fact a well-thought out scheme to “socialise” the losses, i.e., transfer the losses which the elites are suffering onto the backs of the citizenry.

Ireland, UK and the US are doing precisely the same thing. The people basically know they are being screwed yet feel helpless to act.

The only defence - and it’s not much of a defence - the people have is to constantly change the governments they elect, irrespective of how incompetent an opposition may seem. Strictly enforced regulations and transparency are also good defences against the emergence of parasitic elites.

Elites are the real enemy of the people.

[Open_Window]

@Septic Crank

@EireClare

why oh why did iceland ‘nationalise’ their banks. If they had just allowed them to collapse, the ‘creditors’ (most of whom have hands just as dirty as the banks themselves) would have been wiped out and the state would not be in the intergeneration quagmire they find themselves in now.

Because elites everywhere conspire to impoverish their citizenry and identify far more with their international counterparts than with their own citizenry. What looks like a stupid decision is in fact a well-thought out scheme to “socialise” the losses, i.e., transfer the losses which the elites are suffering onto the backs of the citizenry.

Ireland, UK and the US are doing precisely the same thing. The people basically know they are being screwed yet feel helpless to act.

The only defence - and it’s not much of a defence - the people have is to constantly change the governments they elect, irrespective of how incompetent an opposition may seem. Strictly enforced regulations and transparency are also good defences against the emergence of parasitic elites.

Elites are the real enemy of the people.

…and the only defense ever is revolution.

[Bigby]

@Septic Crank

The only defence - and it’s not much of a defence - the people have is to constantly change the governments they elect, irrespective of how incompetent an opposition may seem. Strictly enforced regulations and transparency are also good defences against the emergence of parasitic elites.

Nappies and governments - both need to be changed regularly and for the same reasons.

[ewd3]

great article

[the_edge]

Interesting that he acknowledges printing money as an acceptable means of eroding debt (thus offending against a PIN sacred cow)

Governments do this by printing money and running budget deficits (spending more than they take in through taxes) large enough to raise prices as this new money chases the same volume of goods That is how Rome depreciated its currency in antiquity, and how America managed to erode much of its own debt in the 1970s – and how the dollar’s falling international value has wiped out much of the U.S. international debt in recent years. This price inflation reduces the debt burden – as long as wages and other income rise in tandem.

[ewd3]

@the edge

Interesting that he acknowledges printing money as an acceptable means of eroding debt (thus offending against a PIN sacred cow)

Governments do this by printing money and running budget deficits (spending more than they take in through taxes) large enough to raise prices as this new money chases the same volume of goods That is how Rome depreciated its currency in antiquity, and how America managed to erode much of its own debt in the 1970s – and how the dollar’s falling international value has wiped out much of the U.S. international debt in recent years. This price inflation reduces the debt burden – as long as wages and other income rise in tandem.

A sacred cow of many pinsters but not a pin sacred cow.

sounds like the lesser of two evils at the moment but the krauts will never buy it

[Puck_may_be_Famous]

@the edge

Interesting that he acknowledges printing money as an acceptable means of eroding debt (thus offending against a PIN sacred cow)

Governments do this by printing money and running budget deficits (spending more than they take in through taxes) large enough to raise prices as this new money chases the same volume of goods That is how Rome depreciated its currency in antiquity, and how America managed to erode much of its own debt in the 1970s – and how the dollar’s falling international value has wiped out much of the U.S. international debt in recent years. This price inflation reduces the debt burden – as long as wages and other income rise in tandem.

Inflating your currency only repudiates your debts to your own citizens, it increases the difficulty of repaying foreign debt. Unless your debts to foreigners are denominated in your own currency, as is the case with the USA.

The Dollar became the world’s reserve currency in 1944 because it was 100% exchangable for gold at the rate of $35 per troy oz. The reserve currency was in effect still gold. The world was trusting that it was in the USA’s interest not to print more dollars than they could redeem.

When you give politicians and their central bank the power to effectively print gold then you are putting a lot of trust in human beings. If you were Richard Nixon with an unpopular war to pay for and demonstrations on the streets would you a) increase taxes so that the US pays for its foreign policy, or b) print the money you need at the expense of foreigners who can’t vote in your elections?

The French called their bluff and asked for the gold. Nixon understood that the gold was not a “barbaric relic” but the only real money on the planet. Otherwise he would have let them have the silly yellow metal. He closed the international gold window. That should have been the end of that but America has been so sucessful in persuading the world that “we’re good for it” that each successive administration has come to believe that it dosn’t matter how much you print because the waiter is never going to present the bill. Well the bill has arrived and there’re trying to hide in the jax.

Inflating your currency when a high proportion of government and personal debt is denominated in foreign currency is not a solution it is a disaster.

However, if you can issue debt in your own currency then you can live on easy street and then screw you creditors using inflation. When they finally realise they’re being screwed they will have to eat their losses. Then they stop lending to you. What do you do then?

[Open_Window]

Build a bigger jax? Get some portaloos?

[ixus]

Good stuff, but man that’s a long read. Found it a bit repetitive at times, or maybe I just kept reading the same paragraph.

[optimus_1]

Hope our creditors dont follow U K and use Anti Terrorist laws as against Iceland…

Such law abiding gentlemen.

[Bostonorberlin]

@ixus

Good stuff, but man that’s a long read. Found it a bit repetitive at times, or maybe I just kept reading the same paragraph.

yeah I thought the same thing, kept thinking I was after paging up and not paging down.
ahh the beauty of history ecapsulated in a single read, fair play alot of research but sure words dont mean much unless your an academic and its your job and you paid by the word count.
is it a road to damascus aticle, the author seems to have had a long and distinguished career working the other side of the street for investment banks and now comes to say how predatory they were, i wonder did he return the money left lodging in his bank account after his time working on Wall St squeezing the balance of payments on South American states…
whatever…

[rock3r]

@Puck may be Famous

Then they stop lending to you. What do you do then?

At some point I hope they realise that money is 99% bullshit and is no good reason why people can’t get along and cooperate.

Is that the way it’s going to be? Western Europe had a fine future of cooperation with Iceland ahead of it. We were going to build up infrastructure to harness Iceland’s immense geothermal power to help us build a three-pronged all-renewable energy future (along with wind and solar power) for the whole of Europe.

Now, because some w4nkers all over Europe went mad with greed, we’re going to dump that future and go back to buying poison gas from Putin.

[Open_Window]

@rock3r

@Puck may be Famous

Then they stop lending to you. What do you do then?

At some point I hope they realise that money is 99% bullshit and is no good reason why people can’t get along and cooperate.

Is that the way it’s going to be? Western Europe had a fine future of cooperation with Iceland ahead of it. We were going to build up infrastructure to harness Iceland’s immense geothermal power to help us build a three-pronged all-renewable energy future (along with wind and solar power) for the whole of Europe.

Now, because some w4nkers all over Europe went mad with greed, we’re going to dump that future and go back to buying poison gas from Putin.

The future is not lost. It resides within all of us.

[Bostonorberlin]

@Open Window

The future is not lost. It resides within all of us.

And the past resides within us all too, and look what the majority of people did with their recent past. Mortgage, second car, Santa ponza for the xmas hols, flat screen HD and nobody saw this coming.

lots of reference to feudal times in the article and how structures were put in place to create this debt penory society.
He makes no reference to the uprisings that have occurred throughout history where ordinary workers have fought, usually unsuccessful, but fought none the less and given blood and lives against oppressive industrial, economic entities.
It would have rounded the whole article off nicely if he had addreesed this angle, the lack of mass population protests when the gravy train (to good to be true) was coming thru town and everyone wanted on it.

I dont recall any events in the last 20 years worthy of such claims. (bar Anti-globalisation protests)
They people got what the people deserved, twas all gladiators on a Saturday keep the roman citizens happy, football and reality TV and basically the general populace took it up the kyber pass.

[garcia]

now that i’ve broken my long lurking silence on this board, i might as well say what a great article i thought that was.

i posted it on another board and someone remarked that a lot of countries have recovered quickly after default, but they tend to be the countries with large manufacturing / extractive industries. russia falls into that category, as does iceland with its fishing and geothermal energy.

what would we do?