Iceland: A great example for the rest of the world

[Iowa_Flames_Fan]

No, it really is that simple. I don't care that the UK says that Iceland has to pay. They just want their money--and they don't get to decide.

Why didn't IceSave depositors do their own due diligence? If I were investing in a foreign private bank with no insurance, I'd sure do some checking around. Government (especially a foreign government) is not there to protect you from your own stupidity.

The fact is, the Icelandic taxpayer did nothing wrong (apart from voting in a government that was beholden to the idiotic deregulation ideology of Milton Friedman) and now they're being asked to foot the bill for a gang of crooks who have all taken their money and fled the country, just because some investors in Europe lost a bunch of money investing in an over-leveraged bank.

I'll ask again: if Nesbitt Burns owed a gajillion dollars to a banker in Brazil, does that mean YOU have to pay, because you're a Canadian? What if the IMF says so? What if Brazil says so?

Sorry--this is fantasyland. There's no "contractual" provision in the EEA that says that members have to give free insurance to stupid investors throughout the region. That's not real life. Real life is this: a person who invests in a bank that has no money is an idiot. When that person loses that money, they become an idiot with less money.

Tell me why government should be involved? Not why the UK thinks they should, or the IMF thinks they should. I want to know why YOU think they should.

[afc wimbledon]

Originally Posted by Iowa_Flames_Fan

No, it really is that simple. I don't care that the UK says that Iceland has to pay. They just want their money--and they don't get to decide.

Why didn't IceSave depositors do their own due diligence? If I were investing in a foreign private bank with no insurance, I'd sure do some checking around. Government (especially a foreign government) is not there to protect you from your own stupidity.

The fact is, the Icelandic taxpayer did nothing wrong (apart from voting in a government that was beholden to the idiotic deregulation ideology of Milton Friedman) and now they're being asked to foot the bill for a gang of crooks who have all taken their money and fled the country, just because some investors in Europe lost a bunch of money investing in an over-leveraged bank.

I'll ask again: if Nesbitt Burns owed a gajillion dollars to a banker in Brazil, does that mean YOU have to pay, because you're a Canadian? What if the IMF says so? What if Brazil says so?

Sorry--this is fantasyland. There's no "contractual" provision in the EEA that says that members have to give free insurance to stupid investors throughout the region. That's not real life. Real life is this: a person who invests in a bank that has no money is an idiot. When that person loses that money, they become an idiot with less money.

Tell me why government should be involved? Not why the UK thinks they should, or the IMF thinks they should. I want to know why YOU think they should.

Because the Icelandic goverment took over operations of the Bank in order to protect Icelandic deposits. You take over a private bank you take over all of its obligations not just the local ones who vote for you.

[freedogger]

Originally Posted by THE SCUD

They are dirty welshing *#&^#@'ers and I hope their economy collapses again. People who welsh on debts deserve to live poor, crappy lives IMO.

Its capitalism. Crappy decisions to make loans are justly rewarded.

[Dan02]

Originally Posted by Iowa_Flames_Fan

This is incorrect. Iceland doesn't owe Britain or the Netherlands a cent. The money was borrowed by IceSave, an unregulated private bank, which had at the relevant time virtually no assets at all, and a mountain of debt on paper that really should have set off alarm bells.

The equivalent would be if a hedge fund in Canada owed money to banks in other countries. Should the government pay that back? Sorry--that's not how life works. You don't get free insurance paid for by the taxpayer because you didn't do your own due diligence.

For this discussion to move forward, you really need to explain why you think the taxpayer should be on the hook for money borrowed by a private bank. I don't think the government should be offering free loan insurance to international investors who can't take care of their own money. Call me a libertarian, I guess.

Now maybe I'm confused as hell, but there IS a government backed program in both the US and Canada which guarantees minimum balances in both those countries and would cover it if the banks defaulted. In the US it's the FDIC which guarantees bank balances up to 250,000 per depositor per bank. In Canada it's the CDIC covers up to 100,000 per depositor per bank of most bank accounts in Canadian funds.

Assuming there is something similar in Iceland, yes sure as hell the government/people are on the hook for covering the minimum deposits.

Iceland was just lucky they are small/insignificant enough that what they did could effectively be ignored. If they were a economy which mattered, I think it would be a completely different story. If Canadian banks stiffed Americans of a few hundred billion, anyone wanna take a guess at what would happen?

[Iowa_Flames_Fan]

Originally Posted by Dan02

Now maybe I'm confused as hell, but there IS a government backed program in both the US and Canada which guarantees minimum balances in both those countries and would cover it if the banks defaulted. In the US it's the FDIC which guarantees bank balances up to 250,000 per depositor per bank. In Canada it's the CDIC covers up to 100,000 per depositor per bank of most bank accounts in Canadian funds.

Assuming there is something similar in Iceland, yes sure as hell the government/people are on the hook for covering the minimum deposits.

Iceland was just lucky they are small/insignificant enough that what they did could effectively be ignored. If they were a economy which mattered, I think it would be a completely different story. If Canadian banks stiffed Americans of a few hundred billion, anyone wanna take a guess at what would happen?

Which, as Thor noted, they are doing, in accordance with domestic law and their international obligations. (he knows more than I do about this, since he's actually in Iceland).

In your hypothetical, my guess is that there's sufficient comity between Canada and the U.S. that we would allow their U.S. creditors to execute against their domestic assets. You're suggesting that Canadian taxpayers would foot the bill, over and above the minimal indemnification offered by the CDIC? (Note that there is a massive difference between paying out a minimum deposit through a government-backed insurance program and actually draining public coffers to cover the actual face-value debts of a bank that went under)

You're certainly entitled to that opinion--but for my part I rather doubt it. I take a different view of the "size" issue--I think that the UK creditors thought they could push Iceland around and recover their lost money from the taxpayer just because they're the big dogs of the North Atlantic. To achieve this, they've framed the issue as "Iceland" owes money to the "U.K." as though this were an international obligation taken on by the government of Iceland which it is now failing to honour. The problem is that's not what happened--and that's really the only point I'm trying to make here.

[Iowa_Flames_Fan]

Originally Posted by afc wimbledon

Because the Icelandic goverment took over operations of the Bank in order to protect Icelandic deposits. You take over a private bank you take over all of its obligations not just the local ones who vote for you.

Is this a principle of international law? Or the domestic law of Iceland?

I'm unaware of any principle in law that limits what action a government can take in furtherance of the interests of its own citizens when a privately owned bank goes under.

Look: the directors of IceSave were crooks, plain and simple. The government of Iceland is guilty of implementing a Milton-Friedman banking regulation scheme that allowed these guys to get rich quick by leveraging their own bank right out of existence in spite of the fact that it had no assets at all. So it's not as if the government is totally innocent here.

But we also need to face facts: it wasn't exactly a secret that IceSave was over-leveraged. A sophisticated investor should know better than to sink money into this kind of scheme, and if they don't... well, they're free to seek a remedy in Icelandic courts against the assets of IceSave, if they can find any. The real question is: why did anybody put money into this thing? And if they did, why are they now asking for additional insurance after the fact? Shouldn't they have done that first?

[Dan02]

Originally Posted by Iowa_Flames_Fan

Which, as Thor noted, they are doing, in accordance with domestic law and their international obligations. (he knows more than I do about this, since he's actually in Iceland).

In your hypothetical, my guess is that there's sufficient comity between Canada and the U.S. that we would allow their U.S. creditors to execute against their domestic assets. You're suggesting that Canadian taxpayers would foot the bill, over and above the minimal indemnification offered by the CDIC? (Note that there is a massive difference between paying out a minimum deposit through a government-backed insurance program and actually draining public coffers to cover the actual face-value debts of a bank that went under)

You're certainly entitled to that opinion--but for my part I rather doubt it. I take a different view of the "size" issue--I think that the UK creditors thought they could push Iceland around and recover their lost money from the taxpayer just because they're the big dogs of the North Atlantic. To achieve this, they've framed the issue as "Iceland" owes money to the "U.K." as though this were an international obligation taken on by the government of Iceland which it is now failing to honour. The problem is that's not what happened--and that's really the only point I'm trying to make here.

As i said, maybe I'm confused as hell, but I was under the impression that the whole issue is the Icelandic government/people were refusing the cover the minimum deposit insurance offered up by their international agreements. In that case the Icelandic government does indeed owe the UK/netherlands citizens IMO.

totally with you though, anything above that minimum insured levels and the UK/netherlanders can pound sand.

[Locke]

I think one of the things that gets glossed over far too often, and I think is incredibly important is this:

IceSave were and are, an unrepentant gang of crooks. How unrepentant?

There were 2 referendums to get the people of Iceland to cover the minimum deposits because they had no assets, were insolvent and broke.

Both times the Icelandic citizens said no.

Then, MAGICALLY, IceSave ACTUALLY HAS THE ASSETS. They actually had more, not enough to cover anything, not even close, but the bare minimum. They wanted to walk away with that cash while leaving the citizens on the hook.

I agree completely with IFF. Investors wanted to throw caution to the wind to make a quick fortune and in doing so skipped their due diligence entirely. In no way should any government step in and save them, thats an oversimplification, but thats the ultimate definition of Moral Hazard.

It sounded too good to be true. It was too good to be true. But its also a High Risk/High Reward scenario, if you choose to enter into it then you've accepted the level of risk, there are no free safety nets, I dont see why everyone believes that there should be.

Of course everyone wants their money back, but that just isnt going to happen, this isnt Monopoly with your family, theres no 'take backsies.' If you're stupid and make a bad decision, then you get to continue being stupid, just with less money.

[Iowa_Flames_Fan]

Well said, Locke. I couldn't have said it better.

[Sidney Crosby's Hat]

Whatever their constitution is, I'm sure it involves plenty of consonants and 20+ letter words.

[Locke]

Originally Posted by Sidney Crosby's Hat

Whatever their constitution is, I'm sure it involves plenty of consonants and 20+ letter words.

Dont forget, copious amounts of whatever the hell that rotten fish/shark 'delicacy' is.

[GirlySports]

I wonder if our small group here on CP could change the constitution what would we change?

- proportional representation?
- Senate Reform?
- limited terms?
- starve Quebec?
- save Christmas?
- GirlySport is only allowed to start two stupid threads a week?

[Azure]

Originally Posted by Dan02

As i said, maybe I'm confused as hell, but I was under the impression that the whole issue is the Icelandic government/people were refusing the cover the minimum deposit insurance offered up by their international agreements. In that case the Icelandic government does indeed owe the UK/netherlands citizens IMO.

totally with you though, anything above that minimum insured levels and the UK/netherlanders can pound sand.

I was under the assumption that was the case as well. I agree that Icesave were a bunch of crooks and the government allowed all of it to happen because of the deregulation but they also signed the EEA agreement which from what I understand requires them to compensate the depositors to a certain degree. If that isn't the case why would the EFTA rule that it is?

I think the whole thing is a scam as well but you can't just not abide by the terms of a contract that the people of Iceland signed. In fact not only did they sign it but they benefitted from it as well.

[Iowa_Flames_Fan]

Originally Posted by Locke

Dont forget, copious amounts of whatever the hell that rotten fish/shark 'delicacy' is.

It's not so much a "delicacy" as "something guys eat to prove to each other how macho they are."

Iceland pretty much invented Fear Factor.

[Azure]

Originally Posted by Locke

I think one of the things that gets glossed over far too often, and I think is incredibly important is this:

IceSave were and are, an unrepentant gang of crooks. How unrepentant?

There were 2 referendums to get the people of Iceland to cover the minimum deposits because they had no assets, were insolvent and broke.

Both times the Icelandic citizens said no.

Then, MAGICALLY, IceSave ACTUALLY HAS THE ASSETS. They actually had more, not enough to cover anything, not even close, but the bare minimum. They wanted to walk away with that cash while leaving the citizens on the hook.

I agree completely with IFF. Investors wanted to throw caution to the wind to make a quick fortune and in doing so skipped their due diligence entirely. In no way should any government step in and save them, thats an oversimplification, but thats the ultimate definition of Moral Hazard.

It sounded too good to be true. It was too good to be true. But its also a High Risk/High Reward scenario, if you choose to enter into it then you've accepted the level of risk, there are no free safety nets, I dont see why everyone believes that there should be.

Of course everyone wants their money back, but that just isnt going to happen, this isnt Monopoly with your family, theres no 'take backsies.' If you're stupid and make a bad decision, then you get to continue being stupid, just with less money.

I agree with this, but there is the whole EEA agreement that Iceland has to honor.

I think the people of Iceland are being naive and rash. Where are they going to get loans from in the economy tanks again for whatever reason and they need credit to keep things going? From the county that they said 'screw you' too?

Either abide by the agreement you signed or don't expect anyone to help you out.

[Bownesian]

Originally Posted by GirlySports

I wonder if our small group here on CP could change the constitution what would we change?

- proportional representation? Not for the lower house. Under PR and with our divides (cultural, linguistic, economic, geographical) we would end up like a country that has similar divides on a smaller scale - Belgium. For a dirty summary, see: http://fullcomment.nationalpost.com/...no-government/

- Senate Reform?
If reform is the option, I'd make the Senate PR and geographically balanced (25 seats West, 25 Ontario, 25 Quebec, 20 Atlantic Canada, 5 Northern and Aboriginal). I'd leave the House of Commons FPTP and have strict representation by population - no more 4 seats for PEI in the house. Senate becomes a 2/3 majority to force legislative change, 1/2 majority to request legislative change. Reduce House of Commons to 200-300 members. Executive branch is formed from The HoC as is currently done, speakers elected as currently done, Judges as currently done.

- limited terms?
No. Politics is a skill and a trade like any other. Good parliamentarians shouldn't be kicked out on a schedule.Fixed election every 4 years with half of the senate elected every 4 years for an 8 year term.

- starve Quebec?
No and yes. Keep the equalization transfer payment programs as is, kill all regional economic development boards, end Supply Management, keep official bilingualism at the federal level and the rest is up to the provinces. If any other government program other than the transfer payment program introduces population-disproportionate wealth flow from one region to another, that flow will be credited against the transfer payments. For instance if there is a Carbon Tax that unfairly impacts one region and benefits another, that region will be repaid dollar for dollar in equalization.
- other?
1) Transfer tax points directly to cities from the provinces.

2) Redefine federal/provincial roles and taxation levels to reflect modern realities. Education becomes wholly Provincial. Environment becomes wholly Federal. Public Health Care becomes wholly Provincial under the rules of the Canada Health Act but parallel private care is allowed. International trade, internal trade and professional certification, standards etc. are Federal. (e.g. an Engineer in Canada has one standard and one board).

3) Abolish collective rights. This means phasing out the Indian Act and reserve system and hiring based on race, sex, religion would become illegal. A citizen is a citizen. Indian reserves would fall under provincial jurisdiction and would gain the same rights and responsibilities as municipalities do.

[Itse]

It's funny how some people in this thread continuously refuse to read the facts.

As I already linked and quoted previously in this thread from the pages of the IMF, there has been no major backlash from the international financial sector towards Iceland. They are actually getting better rates than countries who in the similar situation took a different path. And this even though UK, a huge player in the financial market, tried to essentially crush Iceland in petty revenge.

Which of course makes perfect sense. Money will be lent for those who can pay back, and those who are riddled with massive debts will have trouble borrowing more money.

At the end of the day, predictability and decisiveness are things that are greatly valued by the financial markets. Iceland was relatively quick to come to decisions about what they felt needed to be done, and they were stern in following through with their plan despite outside pressure. This makes them look good in the future.

When compared to the everlasting indecisiveness of the US and countries in the EU in their times of trouble, and adding that the bloody IMF is basicly saying that "we were wrong, Iceland was right", I'm actually quite amazed that people still think they didn't make exactly the right choice.

[Azure]

They didn't make a choice at all. The government of Iceland is still working on a deal to pay back the money. You know, because they actually understand the terms of signing a contract and then abiding by it afterwards. Unlike the people who seem to think that they can benefit from trading with the EU all those years, but when it comes to honoring a part of the contract that isn't beneficial at all to Iceland, they want to back out.

As for all the other stuff, I say good on them too.

[Dan02]

Originally Posted by Itse

When compared to the everlasting indecisiveness of the US and countries in the EU in their times of trouble, and adding that the bloody IMF is basicly saying that "we were wrong, Iceland was right", I'm actually quite amazed that people still think they didn't make exactly the right choice.

Dunno, Icelands stock exchange prior to collapse was just over 8000, now it sits at roughly 600.

Maybe Iceland made the right choice for Iceland but on a global scale it was such a small problem that it could be absorbed. From what I understand, the concern for the EU is if one of the countries goes under it'll cause a cascading failure eventually enveloping pretty much every advanced economy.

I'm not to sure how losing 93% of your savings and having unemployment go up by a factor of 8 sounds to you but I think I'll pass.

[Locke]

Originally Posted by Azure

I agree with this, but there is the whole EEA agreement that Iceland has to honor.

I think the people of Iceland are being naive and rash. Where are they going to get loans from in the economy tanks again for whatever reason and they need credit to keep things going? From the county that they said 'screw you' too?

Either abide by the agreement you signed or don't expect anyone to help you out.

Ah! But Iceland are striving towards something better than that. The countries they said 'screw you' to are just whining because they invested, unwisely, with a private company that went bust and lost their money.

They invested in a private company that went bust and lost their money, and they want their money back because....why? Because the government took it over? Think about that. If I invest my money with a company here in Calgary and they go bust and I lose my money will the government just hand it back to me because they're cool like that? No. I took my risk and I lost.

Iceland are striving for something even better, they're going to be a country that is solvent. They'll actually be able to pay their debts back in the future.