Little Iceland Panics Big Banks
By Staff News & Analysis - April 11, 2011

Iceland Says No … The island nation may serve as an example for those who want capitalists to operate at their own risk. In a national referendum Saturday, Icelanders, for the second time, voted against a government proposal to pay the big losses of some of their bankers and their foreign customers, with 60% voting "No" and 40% in favor. For those of us who welcome capitalists, but want them to operate at their own risk, this hopefully sets an example for the rest of Europe. – Wall Street Journal

Dominant Social Theme: The Icelanders are at it again, irresponsible and unwilling to take up their burden. The wrath of the modern world shall surely be visited upon them.

Free-Market Analysis: Yes, reluctantly, the Dutch and British must sue. If the verdict is not appropriately punitive and Iceland's hardy fisherman stock does not learn its lesson in an illustrative fashion, then perhaps the Pentagon's legendary, doomsday weather weapon, HAARP, shall be brought to bear; Iceland to be wiped, sadly, from the map by fire and ice. Over time, surely, its name shall be expunged from the history books; all mention of its miserable banks shall be redacted as well. What Iceland?

For those of us who believe that the world and especially the West is headed in the wrong direction with its endless emphasis on centralization and consolidation leading inevitably to a "one-world order," the saga of little Iceland versus the big banks is actually an inspiring tale. This little nation of 300,000 has twice now voted against accepting a nearly US$7 billion national debt – accrued by several reckless Icelandic financial institutions – that would make every citizen responsible for their banks' actions and the equally rash actions of the Dutch and British governments.

The problem is aptly summed up by a splendid little article in the Wall Street Journal (excerpted above) by Hannes H. Gissurarson out of Reykjavik, Iceland. He explains the evolution of the contretemps as follows:

How Icelandic taxpayers got stuck with this bailout bill is a strange saga. When the international financial crisis hit bottom in the fall of 2008, it became clear that the Icelandic Insurance Fund for Depositors could not cover all the liabilities of the foreign branches of the private Icelandic bank Landsbanki. In order to avoid a general run on their own banks, the British and the Dutch governments decided to reimburse depositors, for not only the principal, but also the interest due, in Landsbanki branches in their countries, up to a certain level.

These two governments then presented the bill to the Icelandic government: £3.5 billion. For the tiny Nordic nation of 320,000, this was an enormous sum, amounting to half of its annual GDP. It would be equivalent to a £700 billion claim on the British government. The Icelandic government protested that it was not responsible for deposits in private banks. It had fully complied with European law in setting up the Icelandic Insurance Fund for Depositors, financed by a levy on the banks.

If the fund could not meet its obligations, it was a problem for those who, at their own risk and for a quick profit, had entrusted their money to Landsbanki. But under threats from the British and the Dutch governments, supported by the European Union and the International Monetary Fund, at the end of 2009 Iceland reluctantly signed a treaty according to which it had to pay the total sum, with stiff interest rates, to the United Kingdom and the Netherlands.

The import of the above unfairness is powerful for those who believe (as we do) that the 21st century is marked by a clash between the truth-telling of the Internet and the dominant social themes – the fear-based promotions – of the Anglo-American elite that seeks a One-World Order. The power elite, which has been attempting to create global government for nearly a century now, or perhaps longer, needs to project a certain inevitability. Iceland's two rejections of attempts to force its citizens to pay for the financial mistakes of others must be causing nausea in the City of London and upending the sense of inevitability that is so important to the wretched bullying that has become the trademark signature of the European Union.

You know it's becoming an issue of utmost international import when Iceland's own central bankers start to squeal. Here's what People's Daily (China) reported just yesterday in an article entitled, "Icelandic central bank official wants end to Icesave issue" (and surely they do):

An Icelandic Central Bank official said Saturday Iceland should get over the Icesave issue as soon as possible to create favorable conditions for a return to growth … Tryggvi Palsson, the Central Bank of Iceland's director for financial stability, [expressed this sentiment] to Xinhua in an interview … before casting his vote in a referendum Friday morning at the poll station in Laugardaslhollin national stadium on whether to accept a deal negotiated between the Icelandic authorities and the British and Dutch authorities.

Palsson said it remained uncertain how much the Landsbanki assets would be worth when they were sold, how much the Icelandic state needed to pay, how much the total amount of the debt would be, as it depended greatly on the exchange rates, and what the legal structure was regarding legal obligations in the European Union (EU) area … Palsson said he believed "this debt is manageable and Iceland has a bright future to go forward." "We must complete things that are part of the international financial crisis and we have to get on to new growth in Iceland."

If the issue could not be resolved through negotiations, it would be brought to the court in the Hague, he warned. Drawn-out court cases meant it might take much longer for Iceland to recover from the financial crisis, Palsson said. The amount Iceland will have to pay could also vary, it could be either a higher amount or a lower amount and "there is a lot of uncertainty about that," said the Central Bank official. "One thing I think would happen is that the ratings of the Icelandic state will deteriorate and it will mean that it will take longer time for the state to be able to raise capital in international markets," Palsson said. "We need to have good relations."

One has to follow these sorts of international dialogues closely to appreciate the above reporting. But for those apt to enjoy such vintages, Palsson's remarks are like, hm-mm … a fine wine, perhaps? Notice, please, the overtones of truculence (Icelanders will be sued in the Hague) general viciousness repurposed as false joviality (Iceland needs to have "good relations" with Europe and the rest of the world) and the final notes that linger on the palate (Iceland's ratings will surely "deteriorate").

The wailing and gnashing of teeth can be heard but only faintly. One needs to be an aficionado (as we are) of the international financial dialogue and to listen closely. But it is there. It is a big deal, as vice president Joe Biden might say. Without the impression of inevitability, the Western financial scene becomes a bad joke. It has not brought prosperity (only expanding misery along with the inevitable decline of civil comity). There is nothing left, finally, for many citizens but slaving away into an old age for a pittance.

What must be done, then? A lawsuit would be nice. Radio Netherlands explains that unruly Icelandic children have thumbed their noses twice at Western Financial Excellencies. Here is the salient information: "Dutch Finance Minister Jan Kees de Jager has responded to the rejection by Icelandic voters of a deal to compensate victims of the Icesave fiasco. ‘I'm very disappointed that the Icesave agreement has been rejected. That's not good either for Iceland or the Netherlands,' he commented on Sunday."

The threat lingers. Radio Netherlands quotes him as saying that the time for negotiations was over and that "Iceland must honour its commitment to pay us back. It's now up to the courts to decide the case." What then is the future for this miserable little country of cod hunters? "Economic and political chaos," reports Radio Netherlands "now that voters have for the second time rejected the deal in a referendum."

If only the citizens of Iceland saw it that way! The tensions have even begun to put Iceland's joining the EU at risk. And just as irritating to Eurocrats, Iceland's parliament on both occasions prior to referendums might well have Okayed the settlements! On each occasions, Iceland's top leader (two different individuals) stepped in to demand that all 300,000 Icelanders have a say in bill that would be levied on that little fishing nation until 2046. And on both occasions the populace rejected the settlements that Iceland's parliament might have passed. The first time by 90 percent and now by 60 percent.

Every time that little Iceland stands up to the combined banking forces of Europe and Britain, continental blood pressure soars. Worse and worse! Icelanders will not pay the stupid money back. The to-and-fro-ing has put Iceland's merger with the EU at risk; and now these two votes have virtually repudiated a fundamental EU argument about the legitimacy of the union in the first place.

There is almost nothing good coming out of Iceland at the moment from a Eurocrat's perspective. The threat of force is all that's left. People have to believe that no matter how wretched things get they are not going change. Yet here is Gissurarson again with a summation as regards British and Dutch REALISTIC options:

The referendum is likely to have some economic and political consequences. The British and the Dutch governments will undoubtedly grumble, but their options are limited. They can hardly send in the gunboats, as the British did when Iceland extended its fisheries zone in the 1970s. They are not likely to take Iceland to court, either, because the matter is sensitive whichever way an eventual judgment would go, while it is not clear which court would have jurisdiction. In the long run, the No-vote will probably improve Iceland's credit ratings because it means that the country does not have this additional debt to deal with.

Gissurarson has come to a conclusion that is entirely different than the one reported on by thousands of mainstream publications (and one of Iceland's own central bankers). All of these media reports explain that Iceland is doomed now and that Hague will visit extreme punishments on this tiny island. And yet Gissurarson, who should know, has an entirely different take.

Is this then why the Dutch and British negotiated so desperately and have worked so hard for two years now to get these awful fishermen to accept a "deal" – any deal – that will show the world's larger populations that indeed when banks fail, taxpayers pay? It is not working out – and the world sees the result.

No, there is no joy in Brussels today. Iceland refuses to drink its bitter draught and the rest of the EU quietly seethes. Ireland is upset about its austerity; the Greeks continue to complain; Portugal has just declared the inevitability of bankruptcy and Spain may be up next. The idea that suffering populations are responsible for the sins of the banking class is a virtual Brussels' axiom. It must be enforced at all costs. But how? O … how?

After Thoughts

HAARP's transmission towers lever gradually into place like the fearful fingers of a mad and wrathful God. The icy darkness of Alaska cracks a grim smile. Power arcs startlingly, with the electrical certitude of a doomsday moment. Soon there will be nothing left of Iceland but a boiling pit of salt water accompanied by the despairful cries of 300,000 damned fisherman-spirits. (All Icelanders are clearly going to Hell). No one, in fact, will be able to explain the 400 foot tidal wave that arose from nowhere to scour Iceland clean! Only the cod rejoice.

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