BRAVE ICELAND!

by Lyndon H. LaRouche, Jr.

January 7, 2010

It goes virtually without saying, that I am proud of Iceland and its President.

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Iceland President Stands by His People

January 8, 2010 (LPAC)-- Despite the hostility of the governments of Great Britain and the Netherlands, which have threatened to kick Iceland out of the "international community," Iceland President Olaf Ragnar Grimsson is standing by his decision, and defending, in interviews and statements, the right of his people to national sovereignty. In the Financial Times today, he is quoted as saying, "The Icelandic constitution is based on the fundamental principle that the people have sovereignty. It is the responsibility of the President to make sure that the will of the people will prevail."

He then called on the peoples of Britain and Netherlands ("and their political leaders") to stand "with the longstanding democratic traditions of Britain and the Netherlands, acknowledging that a referendum is a democratic way of making a decision," Grimsson was also interviewed in Swedish radio.

In an interview with BBC on Wednesday evening, Grimsson was verbally assaulted by the host, who looked like an attorney for Shylock and treated the President of a state like a felon. "Don't trust an Icelander," "Aren't international agreements more important than a President's will?" and "Are you happy with these results?" (downrating, loss of international credit, etc.) were the interviewer's questions and remarks. Grimsson taught the arrogant fellow a lesson, telling him, "I understand that Britain is not familiar with systems where the people is called to express its will " and that in Iceland, "not the parliament, but the nation is sovereign."

In contrast to the oligarchy, the British people continue to express their sympathy for Icelanders, at least judging from readers' comments continuing to flow in to major dailies (see below). It is probably due to this that a faction of the British establishment, represented by the Financial Times, has taken a distance from the government and openly rejected the "hard-line" approach towards Iceland. Significantly, an FT editorial today is entitled "Do Not Put Iceland in a Debtors' Prison." The FT also chose to publish a letter by Advocacy International, saying that it is "unjust" to make Iceland take sole responsibility for the "reckless behavior of private bankers and risk-takers."

The FT ran as a blowup quote, the view of its chief financial commentator, Martin Wolf: "This is not about cutting a running deficit, which is, indeed, unavoidable. It is about forcing innocent people to assume gigantic liabilities for which they have no legal or moral responsibility. How would U.K. citizens feel if they were forced to assume a debt of ￡400 billion because of HSBC's failure to meet deposit insurance liabilities in Asia? Let the U.K. take the bank's assets and leave it at that."

Also, Michael Hudson from the University of Missouri writes that "Iceland has the right to refuse debt servitude." Hudson argues that Iceland could pay foreign debt only out of balance-of-payments receipts, i.e. through export revenues. But already fish export revenues have been entirely earmarked to service existing debt; the same goes for aluminum exports and its geothermal and hydroelectric resources. Add to this the fact that most families have mortgages which, if the currency is depreciated, can only get worse, and you have the picture: It is impossible for Iceland to pay the debt. "A pragmatic economic principle is at work in such conditions. Debts that cannot be paid, will not." If we have learned the lessons of the collapse of living standards in post-Soviet Russia, he ends by asking, "by how many years must Icelandic lifespans shorten?"

According to a European banking source, the British and the Dutch are going to dump the burden on Scandinavian countries. On their side, the resistance organization in Iceland is calling on the Scandinavian governments to support them against the London and The Hague.

Iceland sees the first anti-bailout revolt | City AM

Iceland sees the first anti-bailout revolt City AM

Allister Heath

ALLISTER HEATH

SOMEONE should give Gordon Brown a copy of John Maynard Keynes’ The Economic Consequences of the Peace. Published in 1919, it addressed post-war Germany – but the book is uncannily relevant to the situation in today’s Iceland, explaining how crippling reparations enforced by powerful foreign nations on an unwilling population are counter-productive. Iceland – unlike Weimar Germany – won’t turn to extremism, though an eventual descent into national bankruptcy and hyperinflation is a real possibility, with Fitch yesterday downgrading the country’s debt to junk.

The UK and Dutch governments have been too harsh towards Iceland, to deflect the attention from their own stupidity – and now its people, who fear being pushed into poverty, are revolting. It is the first successful grass-roots anti-tax, anti-bailout revolt since the onset of the credit crunch.

The row boils down to Landsbanki’s Icesave unit, which like the rest of the Icelandic banking system collapsed in 2008. A small group of Icelandic entrepreneurs pushed the crazed Northern Rock banking model to its extreme, borrowing vast amounts to build financial giants with massive European property assets. These were often operated out of London and given the seal of approval by the FSA, academics and “experts”. But when the credit markets imploded, the banks collapsed.

British and Dutch depositors in Icesave were bailed out by their governments; Iceland had said it would cover the first €20,887 in accounts but didn’t have the foreign currency to meet its obligations. It was a worthless promise which should have been seen as such by the UK authorities: tiny nations are physically unable to guarantee all the foreign liabilities of any giant bank that they happen to host. Either they shouldn’t host the banks; or they should explicitly state that they are unprotected and in a real free market; or their banks should take part in pre-funded insurance schemes.

The bankers were incompetent, as were the Icelandic authorities, the UK authorities, the EU and the depositors who didn’t do their research. Egged on by price comparison websites and personal finance pages, the public assumed regulators would ensure every newfangled online bank was safe and forgot that high returns often mean high risk. Instead of acknowledging this, Brown is pursuing a vendetta against Iceland, trying to recoup all of the cash from its government.

Bailouts have been unpopular all over the world. Until now, however, voters were never consulted – but after a fifth of Iceland’s entire population signed a petition against the terms of a proposed £3.6bn reimbursement (at a 5.5 per cent rate of interest and a 14-year schedule) the proposal will now be put to a referendum and crushed. The sums involved are huge: 40-60 per cent of Iceland’s national income, taking the national debt to 200 per cent of GDP. Each of Iceland’s 304,000 citizen would have to pay £11,700 without getting shares or any assets in return. The money would be gone for good. Imagine if UK taxpayers were asked to pay £700bn to overseas governments because one of our banks had messed up. We too would be up in arms.

Iceland will hopefully hand over some money, albeit on more sensible terms. But the last thing we need is for Britain, the IMF and the EU to push Reykjavik into total bankruptcy or nobody will get anything. Shame that Brown, a self-professed Keynesian, has actually failed to heed his master’s warnings. allister.heath@cityam.com