Calgarypuck Forums - The Unofficial Calgary Flames Fan Community - View Single Post - Icelandic citizens say no to paying off debts from private bankers.

tkflames · 01-09-2010, 09:16 AM

Some people have pointed this out correctly, and some are misunderstanding what is going on here. The BBC has some excellent articles on this (which I am too lazy to dig up right now), but they can be summarized as follows to the best of my understanding (feel free to add):

1) ICESave was a privately owned bank that offered unusually high interest rates to foreign investors (6%+ on a regular savings account).

2) The UK and Netherlands has provided a deal to the government to repay these debts starting in five years and then for a period of time at a 5.5% interest rate. This rate is obviously too high for a country that is essentially bankrupt, but the two are unwilling to compromise thus far.

3) Iceland is seeking entry into the EU which Netherlands and the UK obviously have a strong influence on.

4) The IMF has thus far said that their loan to the government is independent of the country Bank/Country reaching a deal on the icesave situation. This is critical as it implies that while Icelands credit rating has been reduced, they are still able to obtain loans in an effort to turn their situation around.

My personal opinion, if what is written above is correct, there is no legal nor moral obligation by the government to honour the foreign debts of a private bank. Financial times would agree with me at minimum on the legal obligation (http://www.ft.com/cms/s/0/8c166a9c-f...44feab49a.html). This is the risk with all foreign (and local) investment. If you want your money to be safe, diversify and invest it in stable countries. This is like investing in the Argentinian currency a few years ago and then demanding your money back when the value dropped to less than the paper it was written on. It is my understanding if I had 2 million dollars in the bank here and the bank went under, I would be left with a mere 100,000 due to the insurance of our banks. I don't think Iceland should be any different, and if the accounts were uninsured, then this is a harsh lesson in foreign investment to those that lost money. Very interesting to see how this is resolved. I expect some compromised deal that holds the Icelandic people responsible for a much smaller portion of this debt will be the eventual outcome.

01-09-2010, 09:16 AM	#24
tkflames First Line Centre Join Date: Feb 2006 Exp:	Some people have pointed this out correctly, and some are misunderstanding what is going on here. The BBC has some excellent articles on this (which I am too lazy to dig up right now), but they can be summarized as follows to the best of my understanding (feel free to add): 1) ICESave was a privately owned bank that offered unusually high interest rates to foreign investors (6%+ on a regular savings account). 2) The UK and Netherlands has provided a deal to the government to repay these debts starting in five years and then for a period of time at a 5.5% interest rate. This rate is obviously too high for a country that is essentially bankrupt, but the two are unwilling to compromise thus far. 3) Iceland is seeking entry into the EU which Netherlands and the UK obviously have a strong influence on. 4) The IMF has thus far said that their loan to the government is independent of the country Bank/Country reaching a deal on the icesave situation. This is critical as it implies that while Icelands credit rating has been reduced, they are still able to obtain loans in an effort to turn their situation around. My personal opinion, if what is written above is correct, there is no legal nor moral obligation by the government to honour the foreign debts of a private bank. Financial times would agree with me at minimum on the legal obligation (http://www.ft.com/cms/s/0/8c166a9c-f...44feab49a.html). This is the risk with all foreign (and local) investment. If you want your money to be safe, diversify and invest it in stable countries. This is like investing in the Argentinian currency a few years ago and then demanding your money back when the value dropped to less than the paper it was written on. It is my understanding if I had 2 million dollars in the bank here and the bank went under, I would be left with a mere 100,000 due to the insurance of our banks. I don't think Iceland should be any different, and if the accounts were uninsured, then this is a harsh lesson in foreign investment to those that lost money. Very interesting to see how this is resolved. I expect some compromised deal that holds the Icelandic people responsible for a much smaller portion of this debt will be the eventual outcome. __________________ Go Flames Go