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Topic: Iceland is essentially bankrupt
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M. Spector
rabble-rouser
Babbler # 8273
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posted 23 October 2008 05:17 PM
quote: Iceland -- better known for its geothermal hot springs, abundant fish, all-night raves and eclectic musicians such as Björk and Sigur Rós -- has now become renowned for something else: It is the first catastrophic, and perhaps most unlikely, casualty of the 2008 economic and financial meltdown.Iceland is now essentially bankrupt after the government took over its three major banks to prevent them from failing. It owes more than $60 billion overseas, about six times the value of its annual economic output. As a professor at London School of Economics said, "No Western country in peacetime has crashed so quickly and so badly." What on earth happened to get Iceland and its banking sector into such a state? It turns out that Iceland, despite its coalition governments and Nordic social values, became a poster child for neoconservative economic policies inspired by Milton Friedman during the past decade. Friedman himself visited Iceland in 1984 and participated in what was described as a "lively television debate" with leading Socialists. This inspired a generation of young conservatives who came to power through the Independence Party in 1991 and have run its government through different coalitions since then…. So how did the much smaller but perhaps more ambitious experiment with Friedmanite economic policies fare in tiny Iceland, one of the most physically isolated countries in the world with a population of only 320,000? Under the leadership of Prime Minister David Oddsson and explicitly inspired by Friedman, Iceland's neoconservative young Turks implemented a radical (but now familiar) program of privatization, tax cuts, reductions in spending and deficits, inflation targeting, central bank independence, free trade and exchange rate flexibility. Corporate taxes were cut from 50 percent down to 18 percent. Privatization and deregulation were driven directly through the prime minister's office, and the major banks were privatized. Economic missions and reports on Iceland issued by the influential International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) largely praised and encouraged these reforms, often disregarding the rising risks for its financial sector until recently. It wasn't as if everyone was unaware of the growing dangers of these policies. In 2001, Joseph Stiglitz, recipient of the Nobel prize in economics and one of the leading lights of the "New Keynesian" school of economics, wrote a remarkably prescient paper for the Central Bank of Iceland. In the paper, he raised alarm about a vulnerable, small, open economy such as Iceland suffering from a severe financial and economic crisis from such policies. In the absence of reforms in the "global financial architecture," Stiglitz outlined a set of regulatory and tax measures that Iceland should implement "both to reduce the likelihood of a crisis and to help manage the economy through a crisis." Stiglitz's paper (PDF) has invaluable advice that should have been considered by any nation -- and especially Iceland -- but it appears these recommendations were ignored. The right-wing reformers certainly didn't change their course. Why would they? Life was good and getting better in the small island state, with showrooms full of fancy cars and booming real estate, business and financial industries. At first, the policies appeared to be very successful. The economy grew at a strong pace, rising until Iceland achieved one of the highest per capita GDPs in the world. In 2007 it also topped the score for the United Nation's Human Development Index. Iceland rocketed to the top 10 in the indexes of economic freedom designed by the Fraser Institute and the Heritage Foundation. It was lauded by the conservative Cato Institute for its flat taxes, privatization and economic freedoms. The institute also criticized Naomi Klein for not mentioning Iceland (along with Ireland, Estonia and Australia) as an example of success in her book about the rise of disaster capitalism, The Shock Doctrine. Icelandic banks and businesses, with the support of their government, expanded aggressively overseas, particularly into the U.K. and the Netherlands. The banking industry and private businesses flourished and created a number of new billionaires on the island. Then it all came crashing down. Inflation and short-term interest rates escalated to 14 percent, and Iceland's currency lost half its value. Now Iceland has an external debt equivalent to about $200,000 per person with virtually no prospect of repaying it.
Toby Sanger, CUPE. Iceland is also a free-trade partner of Canada.
From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005
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Tommy_Paine
rabble-rouser
Babbler # 214
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posted 23 October 2008 05:35 PM
Yes, I heard about this last week or the week before. I think ING went to the rescue, initially, without knowing just how bad things really were. Two days or so ago, the Dutch government threw some cash to ING, because they are going to be in trouble over this.The thought occurred to me that Iceland is a small country, and it's been bankrupted by a handfull of people-- who, if they aren't entirely stupid, have fled the country ahead of all this I should think. In the end, I think Iceland will be okay. I suspect it will be rescued by a country that want's a nuclear submarine base there. We are living in interesting times.
From: The Alley, Behind Montgomery's Tavern | Registered: Apr 2001
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remind
rabble-rouser
Babbler # 6289
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posted 23 October 2008 05:49 PM
mspector, have you come across anything that suggests what Iceland is going to do? Are the "new billionaires" there going to bail them out? Of course, if it was in Icelandic currency they are now merely millionaires. Is some country going to take them over? Like perhaps the Netherlands aka Royal Dutch Shell? And that freakin putz Harper wants to impliment the same in Canada, and then perhaps turn it around and blame it on: quote: rise in "leftist attitudes."
too!It is all enough to make one sick...and are Canadians going to rise up and say NO to Harper's same politicies, or are they too shell-shocked? If the Liberals back Harper on this type of action...and so much for the Green Party's touting of market based solutions, hope they choke on it, along with the Libs and Cons! [ 23 October 2008: Message edited by: remind ]
From: "watching the tide roll away" | Registered: Jun 2004
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M. Spector
rabble-rouser
Babbler # 8273
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posted 23 October 2008 08:28 PM
quote: The International Monetary Fund and a group of Nordic countries plus Russia are poised to announce a $6 billion rescue plan for Iceland, which saw its financial system collapse early this month in the global credit crisis.Iceland would receive about $1 billion in emergency funds from the IMF and the balance of the $6 billion from Norway, Sweden, Denmark and Russia, according to an IMF official who asked not to be identified because the pact had not been formally announced. It was the latest extraordinary rescue effort by governments, central banks and multilateral institutions around the world. A person briefed on the situation said that the cabinet of Prime Minister Geir Haarde of Iceland planned to discuss the IMF package at a meeting Tuesday. Haarde had said last week that a decision on whether to accept IMF funding, and the conditions that it would entail, would be made by Thursday. Iceland has been in dire need of financial help since foreign exchange in the country's currency, the krona, froze more than a week ago, after the government took control of Kaupthing, which was the last of three major banks. Along with Landsbanki and Glitnir, Kaupthing was brought down by the weight of its foreign debts.
International Herald Tribune, Oct. 20
From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005
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M. Spector
rabble-rouser
Babbler # 8273
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posted 23 October 2008 08:33 PM
quote: After Gordon Brown used anti-terror laws to freeze the assets of an Icelandic bank, the Land of the Midnight Sun is fighting back. Given Iceland does not have an army, the uprising is less Viking warrior and more citizen's revolt. Yesterday, more than 35,000 people – a ninth of the population – signed an online petition to let the world know that Icelanders are not terrorists. "Gordon Brown unjustifiably used the Anti-Terrorism Act against the people of Iceland for his own short-term political gain," the petition says. "This has turned a grave situation into a national disaster... hour by hour and day by day the actions of the British Government are indiscriminately obliterating Icelandic interests." Accompanying the petition is a series of portraits of Icelanders holding up their own protestations of innocence. There is the family posing in front of their skiing photos in matching brown and cream knitted jumpers, reassuring "Darling Brown. We are not terrorists but terribly nice and friendly". And there's the blonde toddler. "What did you call me?" she asks, midway through devouring a bowl of ice cream. Then there are the off-the-wall defences ("I'm too handsome to be a terrorist," beams the blond-haired, blue-eyed footballer) and the ironic admissions of guilt. With Islamic terrorists so yesterday, one craggy-faced fisherman has stamped "Icelandic Terrorist" on to his orange overalls. Mr Brown is clearly public enemy No 1 in Iceland, despite being hailed around the world for saving the planet during the worldwide economic crisis. Many people blame his freezing of Landsbanki's assets for triggering a wider collapse that did for the country's largest bank, Kaupthing. Without Mr Brown's meddling, Icelanders say, Kaupthing would have survived, and the nation would not be going cap in hand to the International Monetary Fund for a $6bn bailout.
The Independent
From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005
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Left Turn
rabble-rouser
Babbler # 8662
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posted 25 October 2008 08:37 PM
I just wrote a song about Grodon Brown's blunder on Iceland. It's called "Gordon Brown You've Made a Major Blunder". It's written to the tune of "Mrs. Brown You've Got a Lovely Daughter" by Herman's Hermits. The song is sung from the perspective of the Icelanders.Gordon Brown, you’ve made a real big blunder Real big blunder Freezing our assets is the wrong thing to do Wrong thing to do It’s a grave situation, a national disaster There is no justification for this horrid move Icelanders don’t want to be called terrorists Be called terrorists The land of the midnight sun is fighting back Fightin back We signed a petition, we hope you’ll listen We hope you’ll stop using us for short term political gain You're talkin' about How you've got the clout to Push us about We'll fight back Darling Brown, here’s our firm position Our firm position We think you’re public enemy number one Number one Without your meddling, we would not be facing a nasty bailout by the evil IMF We hope that you sleep well with your decision Your decision And we hope some day your reckoning will come Will come Cause we don’t like you, w’ere not like you So bugger off and leave our politics to us You're talkin' about How you've got the clout to Push us about We'll fight back Gordon Brown you've made a real big blunder Gordon Brown you've made a real big blunder Gordon Brown you've made a real big blunder [ 25 October 2008: Message edited by: Left Turn ]
From: Burnaby, BC | Registered: Mar 2005
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Left Turn
rabble-rouser
Babbler # 8662
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posted 25 October 2008 11:30 PM
Fidel, you're making excuses for the British Labour Party's unwillingness to stand up against neo-liberalism. You're also distracting from the very real freezing of the assets of and Iceland bank by Gordon Brown, which has caused a chain reaction by which Iceland is now bankrupt and facing the spectre of IMF loans. Gordon Brown deserves to be criticized for his horrid decisions on this matter. He's not innocent, and the $15 billion his government has spent on social housing shouldn't excuse him from criticism on this matter.You also need to stop throwing up strawman arguments every time somone comes up with a left critique of social democratic politicians. It creates a distraction from discussing the real issues. Those of us who are further left than social democrats, and who criticize social democratic politicians from the left, are not closet conservatives. [ 25 October 2008: Message edited by: Left Turn ]
From: Burnaby, BC | Registered: Mar 2005
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Fidel
rabble-rouser
Babbler # 5594
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posted 26 October 2008 01:21 AM
I'm not making any excuses for Britain's Labour government. But they do make Canada's Liberals look like Harper-supporting Whigs whose corporate-sponsors couldnt buy themselves a minority Liberal government, so they went with ReformaTories as a stop gap. On the Financial Crisis of Iceland quote: The current financial crisis in Iceland is of course part of and connected to the international upheaval, but it also has its domestic roots. To put it briefly, for more than 17 years, we Icelanders have had a right-wing government led by the right-wing Independence Party in coalition with social democratic or center parties. The main ideology has been neoliberal economics, with great emphasis on privatization and deregulation of most sectors of society, not least the financial sector. Since 2004 we have had increasing inflation and overheating. The management of the economy has been poor, and the few voices of criticism and words of warning from us on the left have not been listened to.
Steingrímur doesn't even mention Gordon Brown. He blames neoliberal voodoo for their conservative government-led crisis. Imagine that. I can just hear our own two long-time neoliberal parties in Canada saying to themselves, "Nobody here but us chickens", and hoping export of Canada's unparalleled natural wealth at a frenzied pace will cover their asses in the long run. "What can not go on forever will stop" And coffee and bananas don't grow so well in Canada. DAY-O! [ 26 October 2008: Message edited by: Fidel ]
From: Viva La Revolución | Registered: Apr 2004
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M. Spector
rabble-rouser
Babbler # 8273
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posted 28 October 2008 07:10 AM
Iceland's central bank raised its key interest rate by a massive six percent to 18%.Iceland has seen its currency plunge in recent weeks after its banking sector collapsed. An increase in interest rates would make its currency more attractive to foreign investors, thereby helping its value. Prime minister Geir Haarde also said the country will need four billion dollars in financial support on top of the two billion dollar loan package announced by the International Monetary Fund. - The Press Association
From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005
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Doug
rabble-rouser
Babbler # 44
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posted 28 October 2008 02:58 PM
Bjork to save the day? quote: She believes her nation should promote its own small-scale green-friendly enterprises and use the global financial crisis to reject economic domination by foreign firms.The celebrity has attacked plans to build two more aluminium smelters to add to three already up and running in Iceland, which has been among the countries hit hardest by the financial turmoil.
[ 28 October 2008: Message edited by: Doug ]
From: Toronto, Canada | Registered: Apr 2001
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M. Spector
rabble-rouser
Babbler # 8273
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posted 02 November 2008 09:21 PM
Icelanders accuse Britain of bullying quote: The troubles between the countries began three weeks ago when Britain took the extraordinary step of using its 2001 antiterrorism laws to freeze the British assets of a failing Icelandic bank. That appeared to brand Iceland a terrorist state. “I must admit that I was absolutely appalled,” the Icelandic foreign minister, Ingibjorg Solrun Gisladottir, said in an interview, describing her horror at opening the British treasury department’s home page at the time and finding Iceland on a list of terrorist entities with Al Qaeda, Sudan and North Korea, among others. In a volatile economic climate, in which appearance matters almost as much as reality, being associated with terrorism is not a good thing. “The immediate effect was to trigger an almost complete freeze on any banking transactions between Iceland and abroad,” said Jon Danielsson, an economist at the London School of Economics. “When you’re labeled a terrorist, nobody does business with you.” The Icelandic prime minister, Geir H. Haarde, accused Britain of “bullying a small neighbor” and said the action was “very out of proportion.” In a recent speech in Beijing, Sir Howard Davies, a former deputy governor of the Bank of England and now the director of the London School of Economics, said that Britain had used a “beggar thy neighbor” approach to Iceland. And an online petition signed so far by more than 20 percent of Iceland’s population said the British prime minister, Gordon Brown, had sacrificed Iceland “for his own short-term political gain,” thereby turning “a grave situation into a national disaster.”… Icelanders say that it is now nearly impossible to get foreign currency into or out of the country. Many banks have refused even to transfer money to Iceland. Importers are having difficulty paying their foreign bills, and exporters are having trouble getting paid by their foreign customers. Many people in Iceland are also furious about what happened to Kaupthing Singer & Friedlander. The British government’s seizure of its assets precipitated the immediate collapse of its parent bank, Kaupthing, which the Icelandic government had been propping up and had hoped would survive. “Kaupthing was the last, best hope of the Icelandic banking system, and it was killed there and then,” Andres Magnusson, an editorial writer for Icelandic Financial News, said in an interview. “This really was the last straw. A lot of Icelanders are asking, ‘Excuse me: who’s the terrorist here?’ ” The bank’s collapse had repercussions beyond Iceland and Britain. More than 8,000 depositors, individuals and businesses, hold Kaupthing Singer & Friedlander accounts worth about $1.34 billion on the Isle of Man, money they cannot get their hands on now — and may never. Iceland is in line to receive a $2 billion loan from the International Monetary Fund and is talking to other Scandinavian countries. It is not entirely friendless: it was recently offered a loan of about $52 million from the tiny Faroe Islands, for which it is very grateful, Mr. Gunnlaugsson said.
From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005
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Fidel
rabble-rouser
Babbler # 5594
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posted 02 November 2008 11:40 PM
Iceland Serves As Appropriate Epitaph For The Neoliberal Economic Policies Of Milton Friedman quote: Iceland, once the leading example of securitization and global savings, is now bankrupt and serves as the leading example of the failed economic policies of capitlism's hero. Toby Sanger writes in Milton And The Meltdown In Iceland that Iceland is now essentially bankrupt after taking over its three major banks to prevent them from failing. These banks owe more than $60 billion overseas, about six times the value of Iceland’s annual economic output. As a professor at London School of Economics said, “No western country in peacetime has crashed so quickly and so badly.This made me wonder: what on earth happened to get Iceland and its banking sector into such a state? It turns out that Iceland, despite its coalition governments and Nordic social mores, became a poster child for Friedmanite economic policies from the 1990s on. Friedman himself visited Iceland in 1984 and participated in a lively television debate with leading Socialists. He inspired a generation of young conservative intellectuals in Iceland who came to power in 1991 through the Independence party and have run the government through different coalitions since then. Under Prime Minister David Oddsson and explicitly inspired by Friedman, they implement a radical (but now familiar) program of privatization, tax cuts, reductions in spending and deficits, inflation control and targeting, central bank independence, free trade and exchange rate flexibility. Corporate taxes were cut from a rate of 50% down to 18%. Privatization and deregulation were driven directly through the Prime Minister’s office and the major banks were privatized early this decade.
Sounds like Chile-skyr con Friedman to me.
From: Viva La Revolución | Registered: Apr 2004
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