REVEALED: The awkward truth about Iceland that the EU and the neocons won’t face

Springtime for Iceland and Germany, winter for Athens and Spain

“Four countries, one policy, half a year…”

In 2001, the banks were deregulated in Iceland. This set the stage for banks to upload debts when foreign companies were accumulated. A major crisis unfolded when banks became unable to refinance their debts.The debts were bonkers, but the advisers all said “Nooooo, nothing to worry about, just offer very high savings rates.” However, it is a fact that the three major banks held foreign debt in excess of €50 billion, or about €160,000 per Icelandic resident.

But a funny thing happened after the Icelandic fiscal collapse of 2008. The Government let most of the banks fail, told the bondholders to whistle for their sovereign debt, didn’t sell any assets, ringfenced the social security budgets, and hunkered down to rebuild the country. The slump was arrested by late 2010, and growth was under way again by mid 2011. One sign of the success of the Icelandic efforts is the fact that the government was successfully able to raise $1 billion with a bond issue on 9 June 2011.

Today, Iceland is regarded as one of Europe’s recovery success stories. It has had two years of economic growth. Unemployment is down to 6.3%, and Iceland is attracting immigrants to fill jobs despite wages having fallen dramatically. The fall in Icelandic currency has hugely reduced imports, and in and of itself thus contributed to surplues where once there were deficits. And as we can see, despite telling the bondholders to shove it, the country is not shut out of debt markets.

Compare and contrast that outcome now with the Greek austerity policies of Wolfie & the Troikanauts. The Greek economy slumped by 6.2% in the last quarter. It was the Greek economy’s worst in the last eight years, which is saying something given that the economy has contracted in 14 of the past 15 quarters.

The figure is the lowest for a second quarter since 2005. But nil desperandum, because Greece is swarming with privatisation advisors explaining how to sell off what’s left of Greek sovereign status. Unfortunately, the folks involved in that sector seem to be suspect. Who’d have thought it, eh? For example, the Slovakian official appointed by the European Commission to advise Greece on privatisations has resigned her position amid corruption allegations in her homeland. Anna Bubenikova, previously head of her country’s National Property Fund, has been advising Greece since August 2011. But the lady resigned her position at the NPF in January, after her name appeared in transcripts of a secret service investigation into Government corruption and cronyism.

The perfect person to advise the Greek elites on bribe-price economics therefore, but not the best person to be doling out advice on property.

Look everyone, this is what the nutters don’t want you to notice: debt forgiveness works. If the creditors are unforgiving, default works. Devaluation is also massively helpful. If you ringfence the social monies and work hard, you’ll still have austerity….but nobody needs to starve.

We, the ClubMeds, the squeezed middle, and the US worker are all being conned.

None of this money is real. Greece should’ve defaulted two years ago and gone back to a devalued Drachma. Had it done so, European taxpayers would be richer, and the Greeks would’ve had two massively successful holiday seasons. The Troika scorched earth drivel is clearly not working, and with every day, the ECB’s acceptance of bondholder haircuts and forgiveness becomes less and less tacit.

The Icelanders were right, and the ClubMed politicians are wrong. Berlin-am-Brussels is wrong. This represents bollocks deconstructed by evidence. It’s what The Slog does. It’s why it exists.

A postscript.

Debate that finding with evidence by all means. But if you come to the comment threads to indulge in ex cathedra preaching and snide remarks, you will be banned. Banning folks for making zero contribution beyond smart-assism is not censorship, it’s culling. Dispute my facts with some of your own, and you’ll get a hearing. Kick off with ‘You really don’t know what you’re talking about do you?’ and I will hit the spam button straight away.

The Slog is meant to be a site where reasonable, civilised people can point up the tissue of blatant lies and latent dissembling we are fed 24/7 by people of all political persuasions, civil servants, implicated MSM titles, bankers, multinational headcases, socialist fluffies and neocon zealots.

It is a site looking for new ideas – not old prejudices, bitter resentment, rude insults and unfounded allegations. And anyone who marrs the overall positive ‘feel’ for the serious reader will disappear very quickly.

Cheers.

JW

 

103 thoughts on “REVEALED: The awkward truth about Iceland that the EU and the neocons won’t face

  1. Dear John – re spam – good move. Being a kind thoughtful and always correct blogger you are the best!
    Do I get my spam with that? Havnt had S fritters in years
    Exmoor Lad !!!!!!!!!

    • @Rollo. Me too. Glad you’ve laid the law down, John, this blog was losing the courteous, considered style which is its hallmark. Thank you.

      • Fair enough on abusive posts but JW can be pretty abusive himself. Sure it’s his blog and he makes the rules but if you dish out scorn and abuse (which JW frequently and undeniably does) , then you shouldn’t be surprised to get some back. The ‘Do as I say, not as I do’ approach enforced by banning some posters seems at odds with The Slogs proclaimed values.

        And when JW spouts bollocks himself – more often than he’d like to admit (see ‘OLYMPICS ON THE GROUND – It isn’t getting any better’ as an example of hearsay and sentiment against the facts) – then he should be called on it.

        Does saying that get me banned?

      • It’s JW’s blog. He can do what he likes with it.

        You could always start your own counter-blog, so to speak.

      • @Sebastian Weetabix

        Second that. John’s site, John’s rules. If you don’t like it, Foxtrot Oscar.

        Yes – isn’t life tragic? Next.

      • Rollo Tomasi: “Does saying that get me banned?”

        Read the article Rollo. Saying stuff like that won’t get you banned. Providing you back it up with evidence. Not complicated.

      • BT: “When he secretly and quietly deletes comments that he doesn’t like (usually for spurious reasons) and censors people who call him out — all without any explanation”

        The tone of the message at the end of the above article was, I believe, not to post ” unfounded allegations” in comments. Bearing that in mind, I take it you can prove the above extract from your recent comment.

    • @BT “goes against the rules of any blog” – oh, don’t be so damned precious. The glorious thing about the internet is it is anarchical. JW can send your stuff down the wormhole if he wants. I for one don’t particularly care if one or two arsey comments are deleted. Some of mine have failed to appear from time to time. In fact I’d be delighted if that drivelling bint who can’t seem to decide if she’s rhodesian south african dutch or whatever but just luvvvvvvvvvs everything Teutonic never appeared again. (Marvellous people, the Germans – I lived there for some time and thoroughly enjoyed it. But sadly, taken collectively, they’ve a weakness for fashionable intellectual ideas. Allied to a formidable work ethic & a gift for organisation, that can be a dangerous trait. )

    • Indeed re the IMF supporting The Slog … a good summary here:

      « Perhaps the best way to understand what went wrong with the Greek adjustment program is to compare it with Iceland’s program.
      On Nov 3rd 2011, the IMF issued the verdict on its 3-year adjustment program for Iceland. The IMF’s verdict was that its “program for Iceland was a success” due to 4 factors:

      1. the decision not to make taxpayers liable for bank losses.
      2. the decision not to tighten fiscal policy during the first year of the IMF program.
      3. preservation and even strengthening of Iceland’s welfare state during the crisis.
      4. prudent use of capital controls. The IMF said: “capital controls were necessary and are now seen as useful addition to policy toolkit”.

      Although permissible under EU treaties, factor 4 is admittedly not consistent with a monetary union. But none of the remaining 3 factors were present in the Greek program. No debt relief was given to Greece early, the fiscal adjustment was front-loaded rather than back-loaded (a massive 5% deficit reduction was required in the first year only), and not much attention was paid to protecting those at the low end of the income distribution. »

      http://www.zerohedge.com/news/jpmorgan-estimates-immediate-losses-greek-exit-could-reach-400-billion

  2. John, you will have a game getting rid of that troll, if he is who I I am quite sure he is,the Supertroll who lurks round the Jersey Haut de la Garenne child abuse whistleblowers sites, he uses multiple accounts and has conversations with himself.

    • Relatively the Greece situation is probably not really a scale up, although the numbers are bigger they proportionally are smaller. Iceland does not compare with Greece alone but with the eurozone in its 17 member entirety. In fact the EZ could more easily save Greece than Iceland saved itself. It is likely valid to suggest Greece’s problems are economic, but the solutions entirely political and legal. The prosecution of Haarde is unlikely to be replicated when it comes to Draghi, Van Rompuy and Barroso, even thought they have openly confessed to the illegalities. The difference then is not necessaries one of scale, but more that Iceland has maintained the Rule of Law, whereas the EZ have not.

    • @Jon, that was my thought immediately the enormous size difference between Iceland a tiny country of 319k people and the much larger countries of Portugal, Italy, Greece, and Spain. Although Iceland defaulting was clearly the right choice for them and caused few international financial ripples due to its tiny size if the PIGS default on mass given their enormous size and a combined population measured in the hundreds of millions the financial wave that follows would be a tsunami. It would doubtless take down a whole load of other struggling countries or maybe even the entire world financial system. Until all of this happens I don’t think anybody really knows what the final result will be. We are certainly living in interesting times.

      • This is the epitome of “too big to fail” thinking. Of course the Icelandic experience will scale. There is no way to avoid unwinding this pile of unsupportable debt. We need to hit the reset button. That means banks and other businesses that are insolvent being allowed to expire. The alternative is debt slavery forever to the banksters.

      • Those descendants of Vikings can at least hold their heads high, unlike the Troika lapdogs & their sycophants the MSM, who made damned sure Iceland’s refusal to be shat on from a great height was not featured in their careerist propaganda bulletins. I am just glad somebody out there has some balls.

      • @Sebastian I do largely agree with you and believe it will scale its just that the collateral damage will be huge and the final results a great deal more unpredictable.

        As for going for a complete reset presumably you don’t mind losing all of your life savings and pension fund. All who saved would be punished all all those with stupid debts would be instantly rewarded. No easy answers.

      • Having experienced the c***s at Equitable Life sh*tting all over one pension pot of mine, I now have a SIPP, largely invested in gold, alcohol, tobacco and firearms. Whatever governments do, financial repression is coming. The choice is simply this: carry on as we are, with perpetual debt slavery and eventually a hyperinflation to wipe out said debts at the government level, or a system reset with banks and others going to the wall. There is no happy outcome but the latter course is better as Iceland is busily demonstrating.

      • Seb Weet: “The alternative is debt slavery forever to the banksters.”

        IMHO, that is where most pols in charge seem to happy with us ending up.

  3. A good post, but you’re missing out on one very central point. The Icelandic parliament passed a bill where the banks (and their debts) would be nationalised. This came about following immense pressure from the UK and Holland. However, the Icelandic President, following a huge popular uprising, refused to sign the bill into law and by the Icelandic constitution, this resulted in a referendum, which resulted in a massive FO to the UK, the Netherlands and Europe. The Icelandic fortunes today can be attributed to a single individual. And what a stand-up man he is! The rest of the political rabble on Iceland were just as cowardly and self centered as the rest of the European politicos.

    • Re the ‘stand-up man’ Icelandic President, and his ultimate willingness to give the people’s voice a chance, the large numbers of Icelanders standing outside the President’s House late at night with flare torches aflame – protesting and seemingly ready to burn his house down – might have had something to do with the President’s pro-populist opinions … photos of the dramatic moment here:
      http://www.wealthdaily.com/articles/iceland-england-bailout-protests/2252

    • Tronnis: I’m glad somebody made that point. It was people power that saved Iceland. The kind of people power that’s been absent elsewhere in Europe. Here in Ireland, the populace just accepted the lies and threats of the ruling elite, then rolled over and played dead. Embarrassing.

  4. John, To re-state the obvious, this whole financial crisis was caused by the banks exploitation/ inflation of the money system, as interest bearing debt. The debts got beyond the point of being serviced and the banks were sitting on humungus losses.
    Their propaganda machine went into overdrive and they convinced the dumb-ass politicians the world was about to come to an end without them.
    The sovereign countries bailed out the banks and this put some of the sovereigns into unserviceable debt, a real merry -go-round.
    All this austerity nonsense is a fig leaf to allow more taxpayers money to be channelled to the bwankers.
    The politicians are complicit in this plundering of the citizen.
    We need a statesman to tell these City and Wall St shysters to take a hike .
    The Bank of England can print as much money, in a controlled manner, to generate a resurgence in our wealth creating Industrial base. Each time they issue billions of QE ( £375 Billion to date to the banks, it is used to to play the derivatives market by the banks,) In fact it is feeding the crisis.
    Banks do not create wealth or real employment, they create interest bearing debt. This is their core business.They do not present any useful social purpose in their present form. Let them rot.

    • Agree they have always been a parasite on their host societies (be the private or central) however they are now literally eating the system in an effort to retain their wealth and privilages. I think that behind all this lies resource depletion, the bankers know what is coming and are sucking as much real wealth out as they can before the coming cataclysm, they will tuck themself away on a private island and ride out the storm.

      If it wasn’t so serious it would be funny, the politicians think they will be part of the saved ones (wait til l hey realise they are being sold down the river too) one or two might escape but not the majority.

      Oh the life of a ‘food eater’ here to pay taxes or die in some far fung swamp and all for what.

  5. JW, You are right to moderate your comments section carefully, your anti bollocks message and evidence based approach are an anathema to the vested interests. Beware the hoards of paid trolls who are employed by PR companies to monitor sites like these and disrupt the message with jibber jabber and pointless polemics. We experience a great deal of deliberate hijacking on the anti-TV licence forum tvlicenceresistance.info and we know who is responsible, of course we can’t prove it at the moment BUT our time will come.

    • IP
      I’m afraid you’re right. I have taken this step partly because some of the Trolling was organised. They were (and are) using aliases gained by hacking my old Microsoft Outlook account.

      • I’d take it as a ringing endorsement of your work John. Whoever “they” are, they think you’re a threat. Hence the idiotic trolling, pretty weak tactics IMO.

        That light you keep shining into their corrupt little world must really be bothering them!

    • could I point you all to a blog called “Pastebin” and to a lengthy article therein entitled:
      “The Gentlemen’s guide to forum spies”. this deals ion depth with the ways that Governments and other interested parties endeavour to undermine good people like JW for example. Some of it is quite technical – at least to an old codger like me.

      This really is required reading. No doubt all you clever people out there will make more sense of than I can. I await your comments with interest.

      Blessings.
      Jez

    • I think the only county that’s ever managed to leave the EU is Greenland having gained its independence from Denmark. I don’t really know if its flourishing but apparently the fishing is excellent but the winters are rather severe. Maybe with the help of global warming it could soon become the new tiger economy.

  6. There is actually nothing really to debate-Iceland’s actions have worked.
    However, as pointed out, this was due to one man having the courage to put the matter before the people for their decision. We have no-one of such stature.

  7. What the Icelandic experience shows is that Capitalism works. The real kind where failures go to the wall. What we have neither works nor is capitalism.

  8. “Greece should’ve defaulted two years ago and gone back to a devalued Drachma. Had it done so, European taxpayers would be richer, and the Greeks would’ve had two massively successful holiday seasons”.

    I expressed pretty much this view to a couple of friends in Athens two years ago, and was met by a polite but most definate ‘Insane Englishman’ response. I don’t know if our Greek friends on this site would agree, but there seemed to be a constant diet of “Pro Euro at any cost” in all Greek TV and newspaper media, really until quite recently, where any dissent on this view was rapidly margenalised to the political extreems.

    There is not a moment of joy in being proved right….when I think of all those hundreds of thousands of Small and Family Greek businesses (and lives) that these inept Troika policies have utterly destroyed………

    I am sure that Ireland and Portugal could tell a similar story of modest little enterprises strangled to death from an utter lack of liquidity. Spain must now be only a few days from discovering how destructive these insane economic policies can be…….I hate civil unrest as a means of political expression, but perhaps it will take the Spanish People to rise up………Theres a lot more of ‘em to try to bully !

    Applying the same economic austerity that worked (in the end) in combining East and West Germany into a single Federal and economic state could never work with such diverse governments, laws and economies as those in Southern Europe……I am most certainly no economist at all…but this observation was never going to be rocket science.

    • You should know that Greek Private TV and Radio companies operate under a temporary license given for free but is hanging as a sword over their heads in case they whisper any truth about the situation. SYRIZA party thretened to revoke the license and issue proper new ones for a resonable fee. Of course it was battered by all of them during the election period. Iceland is NOT Greece in so many ways, i doubt any comparisons can be made. If only we could get rid of the old political brigade. This blog seems to work on this but Venizelos is not the only one. There is a lot to ”deconstruct” here JW.

    • @GrahamD: About the “insane englishman” response. Yes the MSM support the “take the pain and stay in EZ” scenario. but there are still a lot of media (at least 2 TV channels and many newspapers) that cry out 24/7 with all strength for the Drachma solution. The main political parties are also “pro euro”, but people had the chance to vote the parties that supported the Drachma scenario. And you know what? Many of them did not. I have commented on the reasons in past post – to put it in a few words:
      To many Greeks the “Goodbye Euro – Hello Drachma” proposal sounds much like jumping off the crazy Euro-Roller-Coaster, while it’s moving at full speed. They understand that it’s probably gonna be derailed anyway, but are also terrified of the cliffs below. That’s what you’ve been proposing to your Greek friends. Greece’s economy is totally broken. No energy sufficiency like Iceland. Tourism (in it’s present form) cannot bring in the necessary monies.
      Caught between the Scylla and Charybdis, that’s where we are now…
      Hope i helped you understand our reaction better. Oh and GrahamD…respect. Your caring for people here does not go unnoticed….

      • I subscribe to a website called Kiva.com which gives me the opportunity to make loans at $25 dollars a time to poor people of the world trying to set up a business from weaving blankets to selling groceries. (I always get my money back eventually, any cynics out there)
        The point in me posting is to ask whether there is any way that the ordinary people of this world could make micro loans to the people of Greece to help them back on their feet. I don’t have the Internet expertise to set this up. Anyone?

      • I stopped holidaying in Greece after they joined the Euro and prices drifted remorselessly upwards. On this occasion I genuinely don’t mean to be rude, but on my hols I basically want sunshine, decent food, cheap beer and cleanliness – and I want to point out here I’m neither hellenophile nor ‘phobe – but I could stand not being able to put bog paper down the karzi when it was cheap. When it got expensive and I still had the heady aroma of the arsewipe bin in my Greek hotel karzi I had second thoughts and started going to Turkey instead. Cheaper, see? If you want to charge high prices, you need something better than Ottoman-legacy plumbing.

        Now if Greece went back on the drachma and had an instant 70% devaluation I’d be there like a shot, along with millions of others who no longer are prepared to go there, rationalising my dislike of primitive plumbing as I drank beer and ouzo at a metaphorical tuppence a go.

  9. Surely the crucial difference between Iceland and Greece is that the former had its own currency and could therefore wave two fingers at one and all. The [perceived] threat to a Greek devaluation was that it threatened the whole of the Eurozone and therefore couldn’t be allowed to happen (by the Troika) until it was considered inevitable and no longer a threat to the whole financial edifice.

    • One more crucial difference is the mythic incompetence of the corrupt greek politicos and a society that opposed nothing to them for more than 20 years .Now stunned and in a panic, believes anything that is served to them in exchange of keeping their standards of living ( clearly way beyond their means ) .The greeks do not have the real picture of their situation.No one in their country tells them the truth.In their panic and knowledge of the danger of their own politicians , believe that at least if they stay in the EZ , the europeans will do a better job and save them . Clearly they are hanging onto the wrong saviors.They should pull out of the EZ , regain their sovereignty, dignity , build more prisons for their corrupt , rebuild their justice system , gradually change their culture in terms of paying taxes , elect their government with better criteria .The country in it’s current form can not work at any level.Democracy has to be reinstated , democracy not as a recipe but as a real sport with rules and punishment for the one that overstep them .

      • Yana,
        perhaps we should have locked our parents and grandparents at home during the elections afterall…..

      • This is from the businessweek link above, from Omadeon (which also deals with the IMF woman):

        http://www.businessweek.com/news/2012-08-12/imf-says-bailouts-iceland-style-hold-lessons-for-crisis-nations

        ‘Key Challenge’

        Iceland, which started EU membership talks in 2010 with euro-area membership an ultimate goal, is starting to question whether accession to the trade and currency bloc is the right way forward as the region’s debt crisis deepens. Thirty-nine of the Reykjavik-based parliament’s 63 lawmakers oppose continuing EU membership talks and may push to have the process shelved before elections next year, newspaper Morgunbladid said today. ‘

  10. This from Kathimerini today. To say that its all going tits up would be putting it mildly……

    SCHOOLS Many of the country’s schools are in danger of not having enough funds to cover operating costs from September, the primary schoolteachers’ federation (DOE) informed the education ministry on Monday. The DOE said that schools are still waiting for a batch of funding that was supposed to be paid out last April. It also noted that with funding down a third and increases in fuel duty, “it is certain that schools will be unable to buy heating oil next winter”. The union also said that only 200 teachers have been hired this year to replace the 5,000 who have retired.

  11. Pingback: John Ward – Revealed : The Awkward Truth About Icelan That The Eu And The Neocons Won’t Face – 14 August 2012 | Lucas 2012 Infos

  12. Greece can default and remain in the Euro… All this talk about drahmas etc etc is just political wiggle room.

    If you bought Greek Bonds at the time that they where going from 8-9-10-11-12%’s….. and did not know what was coming then quite frankly you should quit your day job if you are an investor and look at well monster.com for one.

    You bought it, it was a bad investment, you lose it… its that simple. All this talk about forgiveness is bollocks… you made a bet and lost. Period. Stop moaning…

    So Greece does not have a problem, investors that bet on black and it landed on red have the problem, however what it did have was a political elite that have nothing to fear. But his is starting to change!!! To what extent time will tell…

    • Who do you actually think own Greek Bonds ? Do you seriously think that most Greek bonds are owned by private individulas like you and me ? Whatabout those institutions, such as the ever hated Banks etc, who are required by law to hold bonds as part of their capital.

      • Some yes… Not sure about what its like in the UK but in Australia as an eg we have superannuation which has about 10% of of monthly pay taken away and added to a fund. These funds own Greeks bonds so YES people in Australia own Greek Govt bonds. This is why I have a self managed fund and have no money in Stocks, Bonds etc etc… This also allows me to work between Greece and Australia much more easily…

        So you see it not just banks… The web has captured everyone… hence why there is so much doom and gloom at the moment and why deck chairs are being moved/shuffled “kicking the can down the road”

  13. Agree completely with what Iceland did and recommended same at the time. However, as noted it was just down to the President that two referenda were held and rejected. Still the political tossers are negotiating entry into the EU and eventual Euro entry. That too will have to go to referendum which will hopefully also be rejected just as the Norwegians sensibly rejected the proposition.

  14. Surely one of the reasons that Iceland was able to default and allow the bondholders to suffer the losses was that those bondholders were foreign. The “haircut” was offshore. That may be true for Greece too, but eventually as the successive blocks of the EU crumble in turn the bondholders will turn out to be domestic, i.e. European (principally German, French & British). So Iceland managed to export its problem, as may Greece. But for the wider EU this will translate into transferring one part of the region’s woes to another. And Germany & France aren’t ready to put up with that.

    • KL……..excellent post! The banks are rapidly erecting firewalls within the EU and the taxpayers will take any default as the EU crumbles.

    • KL: “So Iceland managed to export its problem”

      Not quite the full story. When Iceland’s currency devalued, by quite a considerable amount, most Icelander’s savings, which were in local banks in their national currency were devalued by the same amount, significantly reducing their wealth and spending power.

      • Well that’s true and in an (I imagine) import-dominant economy that is no small penalty. But, still, the bulk of the pain was absorbed abroad. In fact for the essentials sourced domestically – whalemeat & acquavit I seem to recall from my one visit – there was no change. With the EU debt there is no “mostly abroad”; the German & French banks have lent money to Club Med who have squandered it and can’t repay it. There is no collateral, those bondholders’ assets are worthless. Come the crash the whole EU will be poorer.

  15. Sovereign debt forgiveness / write off has always been the only long term way out – no matter what tricks are tried they can’t solve the fundamental problems of massive bank insolvency, Ponzi frauds & institutionalised corruption.
    As soon as it starts, the avalanche of Interest Rate Swaps & other derivatives will implode the mad Anglo US system regardless – Wizards of Oz.
    Europeans are no more wedded to the “ideals” of Wall Street and the City than the Icelandics are. The rest of the world won’t mourn the demise of the $ as the reserve currency either – ZeroHedge, GolemXIV & others have many links to the increasing level of non $ deals being done..
    The question is then what will the ECB become in a non $ dominated world?
    Don’t have the answer, but despite the logic of Greek devaluation etc, I think there’s still some twists left in the € tale within the seismic global changes that are already happening.

  16. JW, Perhaps I may have misunderstood this, but here goes (ps I have a maths degree, but it was a long time ago, perhaps maths has become politicised, as in the USSR?).

    Iceland had an economic slump. It had been walking on water for a while, and then drowned. The measured economic output of the country clearly fell very substantially. After dumping the debt, Iceland was able to register growth once again. Good, but not exactly a surprise as all those who financed the water walking had seen their assets written down, mostly to zero. Dealing with the large cost of servicing those was no longer a restraint on the economy. Some Icelanders lost shirts, the second Range Rover etc. and had to revert to fishing and geyser tourism.

    The question is what has happened to the long term trend of Icelandic GDP? I don’t imagine for a moment that things are back to where they were just pre 2008, but are they back to where they were in 2001, for example?

    A lot of governments (eg our devious ONS) and some commentators use indices very cleverly. They are all politicians! I like to see the absolute numbers, that is, GDP in 2000 = $x/capita (adjusted for pp), in 2008 = $y/capita and now = $z/capita. Some reflection of inflation would be relevant, too. That way you get over the nonsense of quoting year on year changes without ever basing them on a solid foundation in the past.

    All that said, I agree that when a country has made a monumental mess of things (eg Iceland and Greece), the reset button must be pressed and the stupid bondholders and lenders to such a country should have their lengthy hair well and truly razed. Unfortunately that process hurts us too, eg dozy local authorities in the UK (Iceland) and slapdash and (possibly) crooked EU banks in the case of Greece. It works for tiny countries but has nuclear characteristics for larger ones. Press reset now for chaos!

  17. John your point about Iceland vs Greece is a good one, but if everyone defaulted (all the developed nations) then it would set back the world’s economy for dozens of years. Consumption levels of services and goods in western nations is way to high, whether from demographic changes, peak oil or deleveraging, eventually people are going to be more prudent and save far more of their cash. If everyone did that the bottom would fall off the service sector, likewise manufacturing in developing countries would be crippled because they depend too much on exports to the west.

    Iceland is small fry, the biggest threat to our monetary system is the massive bond bubble in the UK, Japan and the USA. Debt due seems to increase and increase with each passing year, so if the countries respective banks lose control of bond yields, then the crazy amounts of currency printing to buy government bonds will start. Until that happens this strange equilibrium we’re in now will prevail for quite a few more years.

    Ultimately debt forgiveness will put so many people’s, governments and corporation’s noses out of joint because everyone is milking this crazy financial system: from property bubbles to bond bubbles, reckless spending and overconsumption…

    That’s why massive amounts of debt forgiveness won’t happen until humanity does it kicking and screaming because it has no other choice, because that’s how we learn; the hard way.

    • Miles…….I like your logic however there are the “unknown unknown’s” that can disrupt your timetable and this strange equilibrium will not prevail for a few more years. I don’t think we have that much time.

  18. It has always been about the bondholders and bo other issue because the advisors to the governments were bankers -or something that sounds like that- and the governements of course just meekly followed the advice.

  19. You really DO know what you’re talking about!! When one is bankcrupt you go under and those who lent you money loose it. Period.

  20. The UK includes one country with the worst features of Iceland and Greece,bankrupt banks and welfare dependency, respectively.The country is called Scotland.I note that our old friend,Garry,has used the Olympics to extol the union,and the dangers of independence for the Jocks,were the cash taps from England to be turned off.This is called ‘statesmanship’.I wonder if anybody is thinking what I am thinking.Grouse flew superlatively,yesterday.

    • I think if you check, the banks you refer to were UK banks, operating under UK legislation and “light touch” regulation.

      • @GP.Point taken ,but the fact remains that RBS,in particular,and Bof S ,which became HBOS,expanded their balance sheets at an exponential rate,without a retail deposit base ,like Lloyds,to support their ambitions,all under the ‘light touch’ non regulation brought in by Garry,who ,lest we forget,took 10 years to finish his studies on the Scottish trade unions…..

    • “were the cash taps from England to be turned off”.
      I think you may have that 180 degrees wrong, but you are already aware of this anyway.

      Nice try. Be brave though. Walk into the golden dawn of Scotland no longer being a drain on the put upon English and enjoy the aftermath of Scottish independence. I wonder how long it will take for the truth of the loss of the monies flowing from Scotland to England to be felt. Months? Weeks? Oh dear.

      Goodness! it can’t come quick enough.

      • @TT .Barnett formula,ring a bell?Monies flowing from Scotland to England?Please. I suppose those declining oil fields are within 12 miles of Scotland?

      • William, ISTR The Barnett formula has some anomalies. Trident being one.
        Keeping the waters nice and muddy suits Westminster, burying inconvenient studies like the mc crone report and perpetuating myths about subsidisation just keep us all in the dark – so that they can divide and rule. Much like what Brussels does to the European states.

  21. Kudos to Iceland for making the moves. I for one would welcome some initiative, soon please!.
    Ring fence that in which we place value and can trust.
    Let the rest go to the wall, allowing the b**locks tsunami to take those who depend on it.

  22. Pingback: The Slog: The Awkward Truth About Iceland that the EU Refuses to Acknowledge

  23. Appropos the Postscript,

    Never mind that McCarthyism is alive and kicking having apparently relocated to South America, I don’t much care whether JW is Left, Right or upside down. I do care that he writes in an entertaining way even when I disagree with him, sometimes he is even humorous, but always he is human and I am inclined to think, informed. For that I thank him and if I had issues with him which led me to accuse him of lying and so on, I’d contact him direct via his published E mail address.

    To do otherwise as several have now, repeatedly, on this Blog is nothing less than Grandstanding and maybe intended to be something much worse.

    Power to you JW, long may you keep on, keeping on.

    • Jwoo – I second that.

      JW – please carry on reminding us all of the total bollocks that is truly out there. One day, with your help, those testes will be forcibly removed from the monster that has been swinging them in all of our faces for far too long.

  24. Yes Iceland was a success story. Well done to them. This is the only real way to deal with the problem. I.e. Give the banks the finger and kick them the hell out of dodge. However forgive the fish reference but Iceland was a minnow. Similar actions in any euro country albeit, however unlikely, would be of a systemically larger order to implode the system with derivative chain reactions.
    Some people mistake the eurocrats devotion to their machine as beloved betroval to the brussels gravy train. While this is somewhat true i also think those with any savvy know the whole darn system is too big to bail.
    The whe discussion is moot anyways as we long ago passed the event horizon. The only question is will the impending Greatest Depression be initiated voluntarily of via a final straw

    • P.S. Yes default and debt forgiveness are different in that the former is forced and the latter is voluntary but they both amount to the same thing, namely one party not getting paid.
      People tend to see a big mean financial institution going down as a ‘serve them right’ event but if it suddenly means your hard earned pension, investments or lifesavings evaporate as a consequence they might not be so keen.
      You cant tingfence lymphatic caner

  25. The contraction in the Greek economy is depressing; 6.5% which means it is well over 18% since 2008. I do not believe that the economy will stablize anytime soon and we could be looking at a 30% contraction before it is stable. This is a complete and utter disaster. The reality is that the economic problems in Greece predate 2008 and the fact is Greece should never have joined the Euro, and it is this silly decision that is killing their economy. All the companies I use to do business with (mostly in Northern Greece) have either gone bust or moved production. I doubt they will come back anytime soon. Of course the Greek economic miracle came to a hault in 1974 – when the Junta were overthrown. Between 1950 and 1973 the economy grew at an average of 7% which was second only to Japan. So maybe what Greece needs is dictatorship !

    • The lesson is that when you have a debt-deflation death spiral with no exchange controls and no ability to devalue you cannot get out of it. Unless they get out of the Euro, default fully (rather than 85% haircuts on private debt) and re-introduce the drachma there is no reason for this contraction to stop. They will end up like North Korea if they do not decouple and default.

      • Would agree with you. Seems to me the European political elite have laid their plans to cut Greece free. Lets see what happens in September. What to do with the nobhead Greek political class, God alone knows.

  26. Pingback: It is a good thing that our approach has worked out so much better for us than t… » Why Aren't You Outraged?

  27. @BT: I have to say I always look out for your comments on this blog as we both sing to the same song sheet especially regarding socialists. I hope you keep posting here as you certainly know what you are talking about (especially your Brazilian comments – I too live in Brazil).

  28. The most interesting point in the article and Iceland is this.

    The currency goes down in value, the imports slow down and that did not remove the demand for those imports from the population.

    So you now have demand and the crushing low cost imports actually end up with a control mechanism imposed upon them “not a trade embargo is it but as good as called affordability”.

    At that point a population can then produce for itself everything without having to consider the imbalance between different global regions.

    Think that is where the UK has to go in the end to get out of the hole but the powers that be do seem to want to prevent it.

  29. Pingback: SPAIN, THE GOOD NEWS: More haircuts…. | A diary of deception and distortion

  30. @BT: You are very welcome.
    I hope you keep posting, I mainly come here for the intelligent/informed comments (like your ones) to be honest with you, I tend to skim read the rest…
    Enjoy the North East, I’m in the SP interior right now, I have farmland here with my (Brazilian) wife…

  31. “….there is a risk that one or more persons will become so angered that they decide to retaliate and flood this blog with stuff you’d rather not see…”
    Seems like the meaning of life is to be able to comment on JW’s blog, or else…
    I prefer Monty Python’s version than yours BT :-)

  32. BT: JW, as previously stated, does this for free, in his own time. This is not the BBC. He has no public service obligation. I like the Slog. So I log on. If you don’t like the Slog, don’t log on. That’s not censorship. It’s not Me or JW being “little Hitlers”. That’s freedom of choice. Excercise it.

    On the disagreeing with John issue, I’ve often disagreed with John, specifically on the Iran issue, which he regularly writes on. All my posts were up for all to see

    Oh, and if you really believe John is a socialist, do a search for any of the current Labour pols, like Harriet Harman, Ed Miliband or Ed Balls and read his opinions on socialists. It might open your eyes.

  33. BT,

    You forgot to mention that Winston Churchill lost that 1945 election, and like the ‘right’ you believe are always right was bailed out of bancruptcy by the UK government as he had lost his fortune speculating on the stock market in the 20/30′s.

    Churchill was a great wartime spokesperson but he was (as most of us are) not good in many aspects especially it appears as to what the majority of British voters wanted in 1945.

  34. @BT:
    You may be a genuine fellow slogger or you may be an agent provocateur; I don’t know so won’t pass comment on that.
    But I don’t hide behind pseudonyms or initials.
    While much of what you say makes sense, it does seem to have an annoyingly abrasive edge to it. We are guests on JW’s blog, and good manners never hurt anyone. You accuse JW of leftward political bias – I haven’t seen any and my politics are right of centre; but it may be my political antennae are dulling with advancing years.
    Much of what JW says also makes sense and that’s why I regularly visit the site. Sometimes he may say something that I think doesn’t add up. I try to check my hunch out and if correct will point it out gently in the comments, trying to add to the debate rather than ranting.
    Finally, I for one am fed up having to google your acronyms – which is it? Hand To Heart? Highway To Hell? Hoping This Helps?

  35. BT: In my above comment, I made the point that if you don’t like the Slog, don’t come here.

    Note however, that I believe you are clearly an intelligent, learned person, and I don’t for a second wish for you to give up the Slog. On the contrary I rather enjoy reading your comments. It’s just that you don’t seem to enjoy posting them.

  36. Thank you Supa – that needed saying and well said. BT: set up your own blog and I, for one, promise to post upon it…your moderation policy permitting, of course.

  37. Bt i apologize i jumped to conclussions .I know is a terrible thing to be misunderstood , i wish things could soften a little , i hate quarrels .Lets remember we all come here for the same thing: seeking truth , more understanding about what on earth is going on , and maybe bonded together to the illusion that there is something we can do about all these games .

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s