Iceland

I have the attention span of a goldfish, it seems: and so in thinking about the current crisis with the banks I had forgotten all about Iceland. But it could not be more relevant.

Iceland's banks crashed in 2008. This had effects in other countries because a lot of people had put their money there: which, I confess, surprised me at the time. But the Icelandic government and people did not take responsibiity for that. They appear to have taken the view that the banks were private businesses and should face the normal outcome of failure: so they let them go bust. The do not seem to have decided they were "too big to fail". This caused a lot of censure from other countries and there was a referendum about how and when the Icelandic people would compensate others for the failure of these institutions: and the people voted not to: or at least not then

Credit to the BBC because today they revisited Iceland to see what had happened: and it seems that they had a bad couple of years but are now doing fine. Well as fine as the rest of us, anyway: and in some ways better.

So I hunted about a bit and I found this

www.bis.org/review/r101027a.pdf

I don't understand all of it: but it seems to confirm that the collapse of the banks has not actually led to truly dire consequences at all. And it occurred to me that in face of all that has been said about what that would mean in other countries we have this one actual example: should that not be a big part of the discussion when we make these decisions?

To be fair, Iceland is a small economy and it might be different if Greece or the UK or Italy etc did this: or if they all did. But I would like some argument about that before I accept this mantra of despair. Iceland is at least some kind of evidence, surely?

www.globalresearch.ca/index.php?context=va&aid=24217

This article outlines the situation before the vote and points out that the national government was recommending action against the national interest. I think it makes a good case not only for Iceland, but for all those countries which are facing the same problems.

I think it is helpful to get some wider background because, as you know, I am not persuaded that the article you linked is wholly correct, for various reasons: but I am not yet in a position to be sure. I am gradually digging about to try to find out more,and will occasionally link stuff I come across as it seems relevant.

ETA: the wiki article is actually quite informative about the causes and course of the Iceland crisis

http://en.wikipedia.org/wiki/2008%E2%80%93...inancial_crisis

Edited by FionaK - 3/9/2011, 19:00

www.paecon.net/PAEReview/issue56/WadeSigurgeirsdottir56.pdf

Well it has taken me a long time but this is the clearest exposition of what happened in Iceland I have come across to date. According to this article Iceland is indeed not out of trouble: the IMF apparently agreed to postpone the usual austerity measures until now: and a major debt also falls due in 2011.

The picture of neoliberal capture of the regulatory system and the complicity ( outright criminality, arguably) of the closely connected government and Prime Minister throughout the period is unusual, and depends on a close knit ruling group in a small country where overlap in function is inevitable, and is not recognised as conflict of interest. But Iceland serves as a small scale, and therefore understandable, example of actions which have been replicated all over the plutocratic world.

It still seems to me that they rejected the usual solution, but as the article makes clear that is not what the neoliberals wanted to do: they didn't have a choice. It is what the people want to do, and they voted to reject responsibility for the retail debt in the UK and Holland: but may yet have to cave in to those demands. Although they have not suffered the drastic outcomes seen in Latvia and Ireland that may yet come when austerity and debt repayment have their full effect. The new constitution has been blocked by the courts, apparently.

What is most shocking is the fact that the Prime Minister and subsequent head of the Central bank pegged the krona at a rate tied to an international basket of currencies just when the crash came: it held for a few hours apparently: just long enough for his pals to get their money out of krona and into other currencies. Coincidence? You decide. When thinking about that note also that when the banks could no longer raise money on the financial markets the quite deliberately raised it in the retail sector first in the UK and then in Holland. Normally the horrible consequences for ordinary people of these kinds of policies are somewhat indirect: but it is clear that they are intended. The only difference is that these bankers had less experience and did not know how to cover their tracks well enough. At least that is how I see it. The article is instructive: read it if you have the stomach

www.aljazeera.com/programmes/counti...source=SocialFl

The first half of this video is about Iceland: I think that it tends to indicate that the truth is somewhere in the middle: but what is undoubtedly true is that refusing to bail the banks has meant that the crisis was relatively short lived.

Iceland did impose austerity, but its unemployment rose sharply and has now fallen back: economic growth was negative for two years but now outstrips both the eurozone and the UK; and the IMF has withdrawn. While they did that they spent on welfare and on measures to cushion the poorest from the worst effects of the recession. They benefited from the fact that they had an independent currency and so could devalue: which those on the euro cannot do. On the whole I think that they did resist the prevailing demands of the IMF and the mainstream economists: and although the interviewer says that austerity worked in Iceland I do not think that the term is being used to mean what it will mean for Greece and other countries which have taken a different course

http://www.businessinsider.com/iceland-gli...welding-2011-12

Iceland has arrrested the CEO of Glitnir bank and two other senior executives. This is what should be happening in many countries: instead we bail them out and worry they might leave the country if we are not nice to them.

How's Iceland now? Still doing ok?

It is so far as I know.

This is essentially a party political broadcast from one of the new politicians there: it is interesting

http://www.guardian.co.uk/commentisfree/20...nd-people-power

Some doubt about whether Iceland is still doing ok has now emerged: and once again the role of the IMF seems to be the root of the problem.

http://michael-hudson.com/2011/11/icelands...value-vultures/

http://www.guardian.co.uk/world/2012/mar/0...financial-crash

Iceland is trying its former prime minister over the financial crash. The report says that he is unlikely to be convicted: nonetheless there is something which feels right about their decision to charge bankers and politicians. Perhaps others will follow suit?

Just an update. Iceland is now credit worthy again according to the ratings agencies (not that I am inclined to take much notice of them cos they are clearly charlatans): it is out of involvement with the IMF: it is bringing criminal prosecutions against those repsonsible: and it has been in economic growth since late 2010/early 2011 roughly

Compare and contrast with Greece: this is what happens when you nationalise the banks and reject austerity: Iceland is one country: but see also Argentina.

But don't forget: there is no alternative!!

http://www.bloomberg.com/news/2012-02-20/i...very-story.html



Whoddathunk?

Former CEO of Kraupthing bank convicted of fraud today. He only has to pay back the 500 million krona he stole so not such a big sentence: but it is something: would that bankers elsewhere were subject to such action

Fair enough: but so far he is the only one of those responsible to have paid any price at all. Well unless you count Fred Goodwin losing his "honour"