Monday, March 8, 2010

The Mouse That Roared

317,000 people live in Iceland and they have done what 300 million Americans have failed to do: they just said no. Interestingly enough it seems as though the Oscar ceremony in Los Angeles yesterday evening was of greater moment than Iceland's vote Saturday on whether or not to submit the entire island to the whims and extravagant demands of the bankers. The Icelandic vote as of Monday morning had garnered no attention at all in the alternative press never mind the mainstream where CNN had a very small headline at the bottom of the page and no analysis at all.

Getty Picture of Icelanders Saying No

What happened was that after Icelandic banks took in a raft of money from a bunch of unsuspecting people across Europe the Icelandic banks went bust, which wasn't surprising as they were being run by a bunch of Icelandic fishermen who had no experience running a bank of any kind. They found themselves in the position of leveraging modest assets in the 2003 boom and ended up with debts of 850 times the annual budget of the entire island. They imitated Wall Street in that they multiplied their assets with creative accounting and like Wall Street a couple of years after them Iceland crashed and left a trail of 100 billion dollars in debts- $330, 000 per citizen. More or less.

What was worse the Icelandic crash sucked about five billion (4 billion Euros) out of the investment funds of millions of Dutch and British small investors, people who never wondered why these suddenly famous Icelandic banks could offer interest rates far above current rates. they plunked their funds into the banks and reaped the benefits until they went bust. At that point the Dutch and British governments stepped in to quell the livid investors and covered the losses. Nice of the governments but they wanted their money back so they trudged off to Reykjavik with their hands held out demanding their money back. The Icelandic government immediately said yes, their currency was devalued by half, the bankers had returned to their fishing boats and an air of desolation was sweeping the land as Range Rovers were repossessed and imports became prohibitively expensive. If you don't import stuff to Iceland you end up living on reindeer and fish and the prospects were making the people moody.

So much so they started setting tires on fire and yelling at their neighbors who, in this small country with four times the population of the Keys,were their neighbors and also their elected leaders. Finally the leaders organized a referendum to allow the people to vote. 62% of voters went to the polls and all but 1.7% of them told Britain and Holland to go screw themselves. Which is a heart warming thing to hear at a time when American bankers get the red carpet treatment from American taxpayers. There is one slight problem.

The schedule of the never ending enlargement of the European Union calls for Croatia and Iceland to join in 2012 and the bets are strong that Britain and Holland will vote a big fat No to Iceland if they don't get their money back. Yet, some observers are saying out loud that the European Union is dying if not dead, not least because of Greece's economic implosion and the European Central Bank's inability to do anything about it. Germany has said they are not helping Greece, especially after Greek leader started mouthing off about reparations for World War Two, and the Union is too embarrassed to bring in the International Monetary Fund to help out. So Greece is dragging the Union down with it. Iceland with all it's horrendous debt hardly seems to rate as a potential asset.

The Icelandic situation is full of implications and no one seems to care. How odd.


Jack Riepe said...

Dear Sir;

It appears as if the cod chewers have had enough. But you do not give the current administration here in the US enough credit. Banksters who robbed the public with these stupid credit swaps may expect the call to have lunch with Obama at any time now. Several may have to sit in the "comfy" chair.

Fondest regards,
Jack • reep • Toad
Twisted Roads

Jack Riepe said...

Dear Sir:

Isn't it sad that I am your most loyal reader when it comes to the political stuff? I'm sure Orin must be reading this crap too, however.

Then again, he's pretty sensible and may be able to resist the rat baait.

Fondest regards,