The Icelandic government has told its citizens that there is no choice: either abide by the agreement or accept isolation from the global financial system, junk bond status in sovereign debt markets and a termination in loans from the IMF.
It's not that complicated.
A duly elected government, representing the citizens of that country, deliberately engaged in a policy of de-regulation which allowed a situation to elevate into a position of extreme sovereign risk.
In other countries around the world, citizens, through their national debt, are accepting responsibility for the mistakes of over-zealous de-regulation by their duly elected governments.
The current Icelandic government is absolutely correct. There is no other choice. Credit to Iceland will rightly cease to exist if the country refuses to honour the debts negotiated by its government.
Anyway, what else are citizens going to say when you ask them the question of "would you rather pay or not pay?" Duh.
Cowperson
__________________
Dear Lord, help me to be the kind of person my dog thinks I am. - Anonymous
Location: In a land without pants, or war, or want. But mostly we care about the pants.
Exp:
Quote:
Originally Posted by Cowperson
Credit to Iceland will rightly cease to exist if the country refuses to honour the debts negotiated by its government.
No it won't. If there's money in it, lenders will lend. It would be accurate to say they will pay a premium to borrow, but the idea that defaulting on debts will shut you out of the international financial system is unsupported by past evidence.
__________________
Better educated sadness than oblivious joy.
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
The Following 2 Users Say Thank You to tkflames For This Useful Post:
I have a few posts to add to this thread, however I have a more pressing debate I'd like to bring up firstly.
A woman in Iceland who formed her own female investment firm decided in TED talks to challenge the idea that the collapse was more about the lack of female diversity than it was anything else.
Iceland has a very strong feminist movement, but this one really took the cake and upset me. Sorry Iceland, but Canada is in town and this BS is not OK.
Here is my letter to her..........
Quote:
I watched your speech, and as a man *of course... I thought it was a bit of a weak argument.
"Telling it as it is..."
This is unique to females? No.
"Emotional due dilligance..."
This is not a sexual trait, as you claimed.
I think its very sad that Iceland should push a value that equal rights means female ideology is superior to male ideals. I know you think immediately that you want to suggest we have a 'mix' of ideals which is the benefit of all.
Its so ridiculous to think that women would manage the world financial system better than any man currently does, because I'm a person who believes that we are equal sexes.
Money corrupts this world, power and greed is the poison that destroys our world. Focusing on women or men is ridiculous. Especially when Iceland one of the MOST feminist and respectful countries of women was part of this collapse. Sorry but because the leaders are men, does not mean the banks, the firms involved did not have many many women who sat through this corruption and did not step up to protest against it.
So lets suggest this is not about women not being represented, which statistically is not true in Iceland, but that greed and benefiting the elite of Iceland was the main tumbling block of our collapse.
__________________ Allskonar fyrir Aumingja!!
The Following User Says Thank You to Thor For This Useful Post:
It seems as though lately one of the fundamental concepts of the open-market economy has fallen by the wayside. Is this another indication that 'moral hazard' is indeed, truly dead?
Its a very interesting argument in my eyes. On one hand you have the question about moral hazard, but on the other in these cases you have the issue of whats in the best interest of society.
So do you allow some people to get away with making bad business decisions and bail them out...but in the process do whats best for society and the economy as a whole? I think the government has an obligation to do just that.
I've noted in some US threads on a similar topic that the sooner the US realizes that debt relief is necessary, the sooner they will be on the road to meaningful recovery. I think the same applies in this case in Iceland.
Who exactly are the Icelandic people placing the blame on here? If they think it was anyone but themselves they're truly out to lunch. They elected the officials that allowed the regime that collapsed the way it did. The involvement isn't direct, but acting as if it's all the fault of others is total BS.
I should add that I don't necessarily think they should pay, if not obligated to it comes down to a essentially a cost/benefit situation. I just can't stand the 'it's the UK's fault' stuff. You made your bed, the US government made their bed, the Irish did etc. If you can get off the hook, good for you. But don't pretend like you didn't take the bait.
Also, stay cheap Iceland. I like you, but I don't like you at 2007 prices.
Who exactly are the Icelandic people placing the blame on here? If they think it was anyone but themselves they're truly out to lunch. They elected the officials that allowed the regime that collapsed the way it did. The involvement isn't direct, but acting as if it's all the fault of others is total BS.
I should add that I don't necessarily think they should pay, if not obligated to it comes down to a essentially a cost/benefit situation. I just can't stand the 'it's the UK's fault' stuff. You made your bed, the US government made their bed, the Irish did etc. If you can get off the hook, good for you. But don't pretend like you didn't take the bait.
Also, stay cheap Iceland. I like you, but I don't like you at 2007 prices.
The private financial institutions that took advantage of a total lack of any kind of regulatory framework to get themselves leveraged up to the eyeballs?
That would be my guess anyway. I don't have a lot of sympathy for the view that when a bank goes under their creditors can shake the entire country down to get their money.
But I agree, they (we?) should stay cheap. I'm going there at the end of the month.
Its an interesting situation, I still firmly believe that this should be dealt with the same way as the bankruptcy of a company, the creditors should be entitled to the assets of the failed company (the Banks) and if that doesnt cover it, tough luck.
Millions of people over the years have lost money investing in companies that went nowhere, why should that change now? Why should the citizens have to repay money that they personally never borrowed? How is that their responsibility?
__________________ The Beatings Shall Continue Until Morale Improves!
This Post Has Been Distilled for the Eradication of Seemingly Incurable Sadness.
The World Ends when you're dead. Until then, you've got more punishment in store. - Flames Fans
If you thought this season would have a happy ending, you haven't been paying attention.
Its an interesting situation, I still firmly believe that this should be dealt with the same way as the bankruptcy of a company, the creditors should be entitled to the assets of the failed company (the Banks) and if that doesnt cover it, tough luck.
Millions of people over the years have lost money investing in companies that went nowhere, why should that change now? Why should the citizens have to repay money that they personally never borrowed? How is that their responsibility?
Technically, Iceland is out of their recession whereas the countries that are trying to deal with their debt by... er... taking on more debt, are struggling (Greece, Ireland, Portugal, Spain).
Technically, Iceland is out of their recession whereas the countries that are trying to deal with their debt by... er... taking on more debt, are struggling (Greece, Ireland, Portugal, Spain).
Haha! Right! But again, not really the average Icelandic citizen's problem.
__________________ The Beatings Shall Continue Until Morale Improves!
This Post Has Been Distilled for the Eradication of Seemingly Incurable Sadness.
The World Ends when you're dead. Until then, you've got more punishment in store. - Flames Fans
If you thought this season would have a happy ending, you haven't been paying attention.
Location: In a land without pants, or war, or want. But mostly we care about the pants.
Exp:
Quote:
Originally Posted by Flames Fan, Ph.D.
Technically, Iceland is out of their recession whereas the countries that are trying to deal with their debt by... er... taking on more debt, are struggling (Greece, Ireland, Portugal, Spain).
That article reinforces what I said a year ago - the whole hullaballoo about how Iceland would be punished for not backing their banks was nothing but rhetoric. Money has a short memory.
__________________
Better educated sadness than oblivious joy.
The Following User Says Thank You to jammies For This Useful Post:
Well its not the debt of the citizen, its the debt of private banks who ran a mock with foreign deposits which were attracted to invest because of those foreign people's greed looking for bank accounts with exceedingly high rates.
The fact that there was about 25 individuals involved with the vast majority of this gung ho investing at the banks, and that the regulators at the government were ignoring their duty for the fact they were loving the high life and money flowing like crazy into Iceland.
This is NOT the fault of the average citizen, and I can fully understand their anger in paying off those debts which had almost nothing to do with them.
Now, where does this leave the nation, IMF and the world bank like to hold countries ransom.
Hopefully Iceland is not one of their victims, unlike many 3rd world nations.
I am sure its in the links but why not just tell the private banks to declare bankruptcy?
Or does the government of Iceland financially back the private banks?
Also blaming private companies for "taking advantage" of a lack regulatory framework isnt much of an argument, for profit companies will always try to maximize profit.
__________________
MYK - Supports Arizona to democtratically pass laws for the state of Arizona
Rudy was the only hope in 08
2011 Election: Cons 40% - Nanos 38% Ekos 34%
Last edited by mykalberta; 12-11-2010 at 07:52 PM.
So after 2 referendums, lots of scaremongering from politicians, bankers, moody's, the UK, Holland, and so forth...
Landsbanki (national bank of Iceland) declared today after evaluating all its assests, it has plenty to cover the debts of Icesave bank.
So what's become really clear today to all of us is that many in government and banking knew they could cover the debts but tried 2 times instead to force the debts onto the people, basically throwing down about $45,000 CAD on to every man/woman/child in the country.
