I scream, you scream, we all scream for Icesave!

The Icelandic collapse reminded me of the end of Laxness’ “Independent People”: the flinty-if-blockheaded crofter Bjartur finally indulges during a WWI-driven commodity boom and commits the little pelf he accumulated over the preceding 500 pp. of winter weather and sheep disease to build a nice house for his daughter. The bubble pops, the house turns out to be shoddy, and Bjartur is left a penniless crofter again. So my question is: Did the common Icelander benefit from the bubble much more than a dog benefits from the table scraps when the meal is rich? How is what I’ve read is a 12,000 euro/head liability going to be distributed amongst the population? Squeeze the “Viking” bankers, surely; but do we need to drive a generation into penury?

(Also, if we’re going to play the they-voted-for-Independence-Party-after-all game; well, the US public voted for Bush II, the Palestinians for Hamas…)

“Ólafur Ragnar Aðalsteinnsson.” Arrgh.

actually scratch that – the powers themselves are not particularly objectionable – what is at the root of my unhappiness with the whole situation was that they’d been folded into an unrelated bill with no real Parliamentary scrutiny.

DD: On your blog you remark that Iceland is “notorious in the Nordic region for being a boastful little country with a selfish streak a mile wide”. As a Dane I have to say that is news to me. To me personally, Iceland isn’t the slightest bit notorious for anything whatsoever. Except, perhaps, for geysers and those cute little horses that walk in odd ways.

The comparison of bank employees to citizens hardly holds – I’m surprised you even attempted it. Certainly RBS can in no way attach their costs for repayment of the bailout personally to their employees – and even equity holders have limited liability. Governments are not corporations, and citizens are neither employees nor shareholders.

Turn the comparison around. What if the UK told all employees of RBS at the time that they as individuals were personally and collectively responsible for paying back the bailout funds given to the bank? They could decide amongst themselves how to divvy up the responsibility, but to the first order every employee would be assessed a personal debt of £550k (RBS bailout cost in the neighborhood of £80bn) and their (and their children’s and grandchildren’s!) paychecks would be garnished for the next 30 years to pay for it.

Would you blame anyone in that situation for refusing to pay?

I’d like to think the blowback from the UK’s invoking terrorism legislation might give the Home Office pause the next time they hoover up every power they’ve wanted to have or that’s been chopped out of other bills and dump it into anti-terrorism legislation. I was around when the Anti-Terrorism, Crime and Security Act was flung together, and it was not pretty.

“I encourage everyone to default on their obligations to the US of A.”

Ha ha, as a net debtor nation, we are immune to that kind of threat! Time for a worldwide Jubilee, I say.

“So I’m supposed to feel sorry for a thoroughly criminal government?”

Wait, you think it’s the British Government that you’re supposed to feel sorry for? How about British taxpayers? Why would anyone expect you to feel sorry for a social construct (the government)?

You all seem to be assuming that Icelandic voters are about to make a choice between (a) dutifully, though perhaps resentfully, paying the money that the UK and the Netherlands are demanding, or (b) bravely, though perhaps foolishly, refusing to. However, as the President of Iceland stated when vetoing the latest Bill and putting the referendum process in motion (as officially translated at english.forseti.is):
“If the Act is approved in the referendum, then naturally it will remain in force. If the referendum goes the other way, then the Act No. 96/2009, which the Althingi passed on 28 August [2009], on the basis of the agreement with the Governments of the United Kingdom and the Netherlands, will continue to be law, recognising that the people of Iceland acknowledge their obligations.”
So the choice is not whether to pay the money, but how, and under which bit of the agreement, which, by the way, is an international legal instrument and would be hard for any government anywhere to wriggle out of. It’s therefore difficult to see the point of all these articles, blog posts and comments written as if anything else might happen (apart from the entertainment value, which is not to be sniffed at).

Gotta say thanks for this article Daniel, as I was surfing around blogs yesterday wondering why all these people were standing up for the little guy, even when the little guy was acting like a greedy little douchebag. Nice to read a sane opinion on the topic.

Clearly any so-called ‘country’ with a six-figure population isn’t in a position to maintain its sovereignty except at the sufferance of its larger neighbours. Since many of these so-called ‘countries’ are corrupt tax-havens, maybe something useful could be done with military force for a change? After all, sooner or later we’re bound to pick on one so small that the invasion actually succeeds.

10- Clearly you’re not one of the many employees of RBS that is or will soon get fired.

This blog post is very misleading.

1) The Icelanders aren’t debtors. An Icelandic bank is a debtor. The UK is insisting that the Icelandic do a govt bail-out on Icelands banks. If they do so *then* the Icelanders will be debtors.

2) The “International Law” you refer is actually an EU regulation 94/19/EC. Iceland disputes the UK’s interpretation of that regulation and wanted the issue referred to the EFTA court (in particular, their claim is that they’d set up a deposit-guarantee fund and were transparent about it’s assets as the EU regulation required, and that the were not obliged under EU regulations to then assume liability above and beyond that if that fund turned out to be insufficient – and while I’m no lawyer that does seem a reasonable reading of section 24 of the relevant EU regulations). The UK replied to that request to take this to the EU court by classifying the govt of the Republic of Iceland as a terrorist organisation and freezing their assets. Ya don’t win friend that way.

3) Whether or not EU regulations do make the Republic of Iceland liable for these debts, there’s another billion pounds of local council deposits which the EU regulations explicitly exclude from the deposit guarantee requirements. The UK want that paid back too. That’s just unreasonable: these are big organisations that made stupid calls in how to invest their dosh, welcome to the free market kiddies.

The orginal EEA treaty that made that point might have been obscure to most icelanders, but the reaffirmations once the banks were crashing (when the UK and Dutch offered to advance the money, later when the IMF offered loans) were major events in Iceland, of which the entire country was aware.

By not vetoing and not demanding referenda then, the Icelandic voters lost the claim that it all happened behind their backs.

Right, but the key phrase in here is “once the banks were crashing”, in other words when it was too late. When it had already happened, behind people’s backs.

The point at issue is that they’re being expected to pay up, big time, for dets that they didn’t actually incur

the idea that a democratically elected government isn’t entitled to incur debts on behalf of its population is a very purist anarchist point of view indeed and I don’t believe that many people in Iceland believed it before last year. And the liability in question was a precondition for international expansion of the Icelandic banking system, which was a very, very popular policy in Iceland.

ejh, slow down there: I said I did not find contrary views. & I am indeed with your view at a loss. I mean it’s not that the citizens didn’t profit from the boom. It’s not that they didn’t vote for this policy that led to both boom & bust. Or do you think that mysteriously all Icelanders have been picked up by aliens and replaced by people that, whilst innocent, happened to pick up life styles that are still vastly better than before the neoliberal policies took hold.

And again: not all citizens need to pay, just like not all RBS employees should pay but the global institution should remain accountable.

What you’re going in for is the idea that this accountability must weigh on ALL citizens – and this is exactly what the rich citizens of Iceland want you to believe in order for THEM to be spared a tax on their estates.

When you say “the rich citizens of Iceland”, do you mean “those citizens of Iceland who are rich” or “the citizens of Iceland, who are rich”?

The comments here remind me of a set of comments here in the GFC threads on executive bonuses . The “Heads I win, tails you lose.” sentiment is wrong whether expressed by greedy risk taking masters of the universe financial types or by the electorate of a liberal democracy.

The connection between me and my children is different, but still: they will suffer for no fault of their own. Of course they shouldn’t starve (as I assume no one in Iceland will starve), but their savings are gone and their lifestyle will certainly change. Because of what someone else did. Such is life.

The problem is that iceland is small, therefore people have some instinctive sympathy for it. They can’t imagine that far from the banks operating “behind people’s backs”, the whole boom was out in the open and had very high “buy in” from these arran-jumper clad plucky icelanders. Consider the huge levels of personal indebtedness of the icelanders – it all comes to more than double those levels in the US (per cap) because normal icelandics were greedily speculating and loaning, aided and abetted by their banks.

If it was the US being pressed to live up to its legal obligations this sympathy wouldn’t exist.

An amusing overview of how much Iceland bought in can be found here.

If you ask me Icelanders are born front office types. They are arrogant and aggressive, if you walk down the street in Rejkavik the men will bodycheck you constantly rather than be polite – walking down a Rejkavik street reminded me of walking through Citigroup’s trading floors some years ago.

Their only problem was a completely lack of experience or education in the field – they certainly had the personality for it.

Another view would be: some people have to pay off their debts, other people have to pay off other people’s debts, some people don’t actually have to pay off their debts at all but can write them off if they haven’t got the money right now, as actually happens all the time in business, something all the people attacking the Icelanders know damned well.

As for the “very rich country” argument, this would hold more water if somebody could demonstrate that the effects of these repayments will be limited to people who can be so described, and won’t affect, for instance, poorer Icelanders or the services on which they depend.

Which of course, they will. Now if people want to argue that these debts have to be paid by the Icelanders, that’s fine: I think their case is strong. But what I find objectionable is the attitude, the attacks on Icelanders as Icelanders, the deliberate eliding of the difference between a wealthy society and the individual people within it, the claim that Icelanders necessarily knew what was going on (unlike the financially-advised people who actually made these risky investments?) and the assumption that there’s a responsibility to pay other people’s debts when we know very well that many people, including wealthy people, don’t have to pay debts they themselves have incurred.

40- fair enough if that’s your point, I don’t see any genetical or cultural predisposition – it could have happened in zillions of other countries (and in fact did happen).

That being said: Iceland is a democracy so it’s up to them to determine how the burden will have to be distributed. Non-Icelanders should not feel guilty if htey don’t succeed in distributing that burden fairly.

Also: they don’t just want to default – they want to default AND get assistance from others not to have to feel the pain of defaulting.

nor do we have to give a toss as the country deteriorates into a sort of deep-frozen Ballardian post-collapse dystopian state smelling strongly of mackerel.

Christ.

44: it should be clear that there is a very strong “but we/they ought to” attached to all those things that we/they don’t have to do.

Iceland smells strongly of sulphur, not mackerel, I think. But the point Ajay’s making is that Iceland isn’t trying to default on its debts (which might be the right thing for it to do if they’re too onerous to pay and I’d support them in that decision). It’s trying to pretend that the debts never existed, or that they weren’t really obligations of the Icelandic state, or that it was totally OK for them to selectively nationalise Landsbanki (assuming only the liabilities of the Icelandic branches) having signed treaties not to carry out this sort of discriminatory measure and raised significant amounts of money on that basis. They want to make the Icesave liability disappear and go on without a stain on their record as if they’d always paid everything in full. It’s clear that the UK and Netherlands (both of which have a very good record in terms of providing debt forgiveness for actually poor countries; Gordon Brown’s probably achieved more in this regard than any other politician ever) can’t be expected to tolerate this bullshit.

From the VF article: “a nation of extremely well-to-do (No. 1 in the United Nations’ 2008 Human Development Index), well-educated, historically rational human beings who had organized themselves to commit one of the single greatest acts of madness in financial history. “You have to understand,” he told me, “Iceland is no longer a country. It is a hedge fund.””

If that’s even half-true, fuck ’em, send in the tanks.

deliberate eliding of the difference between a wealthy society and the individual people within it

Indeed. It’s silly to treat the government’s debt as if it was divvied up into individual overdrafts for every citizen; you will note that it’s a typical rhetorical trick used by rather unpleasant rightwing people all the damn time.

Also, if you’re an actual Icelander, the most likely way in which your life has been affected by the crisis is that any foreign-currency personal loans you took out have got very expensive. Unlike the Icesave money, you are indeed personally responsible for those. So were the Icelandic banks that handed them out like sweets, of course.

The trick was that you could borrow yen, chiefly, at very low rates, and lend them out at rates that were close to consumer credit rates but attractively low – you get your turn, so-and-so buys (typically) a huge car, and this works fine until the exchange rate shifts, at which point all hell breaks loose – so-and-so’s repayments go through the roof, 50% of the so-and-sos declare personal bankruptcy and write off their debts, and then the bank goes bankrupt.

Am I really reduced to explaining things to Worstall? I suppose so – I have flu.

1) Iceland nationalised Landsbanki. Therefore in principle the starting point would be that all of the liabilities of Landsbanki, wholesale deposits, local authorities and all, would become liabilities of the Icelandic sovereign.

2) When Iceland nationalised Landsbanki, it did so by creating a company called Nyi Landsbanki. This company intended to take over all the assets of Landsbanki, but only to assume the liabilities of those branches which were physically located in Iceland. Because the UK quickly realised what was going on and used the well-known terrorisses powers oh noes, it actually ended up only owning those assets which weren’t quickly frozen by the British and Dutch authorities, but this is pretty much by the by.

3) The legal move in (2) is really very dodgy under the EEA treaties because it’s discriminatory treatment. Iceland tried to do it because the alternative (putting Landsbanki into insolvency) would have quickly bankrupted the Icelandic deposit insurance system, meaning that Icelandic depositors would have lost money, and of course that depositors of Kaupthing, Glitnir et al were uninsured. In other words, they did it in order to try and forestall a general bank run on deposits in Iceland.

4) But, in the knowledge that this was a very dodgy legal move (and that their explanation that it was not discriminatory on grounds of nationality, just the “objective” criterion of branch location was unlikely to pass a laugh test), the Icelanders cut a deal with the UK and Netherlands. This was back in the days when the Icelandic government was regarded as being at least potentially trustworthy.

5) The structure of said deal was that the UK and Netherlands would compensate Icesave account holders from their own deposit insurance schemes and Iceland would pay the money back later, from the assets of Landsbanki which at the time Iceland asserted to be solvent.

6) I now have to make a slight adjustment to the timeline, because all this happened so quickly that it gets very confusing if you go through it in chronological rather than logical order. I said that Iceland nationalised Landsbanki into Nyi Landsbanki in steps 1) and 2). Actually they only did this now. Up until shortly after the deal was concluded, they had been telling everyone (almost certainly knowing the opposite to be the case) that Landsbankin was solvent and would remain trading, and that Iceland would guarantee its liabilities on a going concern basis. But this just complicates the story so ignore it, except to keep it in mind as one of the several ways in which Oddson managed to screw his credibility.

“I said that Iceland nationalised Landsbanki into Nyi Landsbanki in steps 1) and 2). Actually they only did this now.”

So the legal situation is that they owed the €21 k per account plus whatever promises they made during the crisis?

And government promises are worth?

well, isn’t that the question?

How much is the promise of the Icelandic government worth? If it is worth a lot, then the credit terms available should be good. If worth only a little, then not so good.

What is it with the Tim’s of this world that haunts them into making self-reflexive comments?

Of course you could do a limited liability nationalization. Just buy up the shares. Now you have a goverment owned company with tons of debt. However this is useless in relations to a bankrun, because what you want to do is to make bondholders and depositors confident in that there money is safe. So for nationalization to work in relation to a bankrun you either need an explicite goverment guarantee of deposits and bonds or a strong belief that the goverment will dont let the goverment owned company fail.

The question is whether Iceland even can save its banks or will face a sovereign debt default at some point. If Iceland does default, it would be better for the country to do it now rather than later. It seems that the political mood is such that default seems likely imho.

@51 – Heh, very good.

” Iceland nationalised Landsbanki. Therefore in principle the starting point would be that all of the liabilities of Landsbanki… would become liabilities of the Icelandic sovereign.”

So if Goldman Sachs runs up 50 trillion in mbs, cdo, cds, etc, starts to fail, and the US gov’t tries to save the World by nationalizing GS, the US taxpayers are on the hook for the 75T? Don’t creditors ever take a haircut short of default and bankruptcy?

Do Americans understand this?

What exactly does neoliberal mean in your post! The Government of David Oddsson (and later of Geir Haarde) followed some sort of corporatist hodge podge of policies whereby the state grew enormously while selling the crown jewels off to friends and allies. Thus, Landsbanki was privatized into the hands of unfit owners who the conservative Independence Party approved off while the regulators where neutered by putting party loyalist in charge. I’m not sure this fits the neoliberal label.

What the Icelandic President refused to sign was a bill amending an earlier bill that has already entered into law whereby the Icelandic state does indeed take on the obligation to pay its Icesave liabilities. The law that was to be amended is thus still in force as is Iceland’s obligation to pay its bills. The problem with the law as it stands is that parliament included in it clauses that unilaterally modified the trilateral Icesave agreement in a manner which the UK and NL governments thought was not on at all. So the issue here is a bit less dramatic than Iceland refusing to pay up.

Iceland’s ability to pay the Icesave bill is however completely uncontested; it can’t. The UK and the NL will thus at some politically expedient point have to renegotiate the agreement. Otherwise, Iceland will default which is hardly in anyone’s interest. Question is whether now is that time or if we should all pretend for a few year that Iceland can pay.

You are right about the machinations of the Icelandic Government after the banking collapse they ranged from stupid to dishonest. You are wrong however to characterize the effects of the Legislation on Emergency Bank Takeovers as a nationalization. The banks (Glitnir and Kaupthing as well as Landsbanki) first vent insolvent and only then where they taken over by resolution committees that kept them open under the emergency legislation. Effectively the banks no longer met the requirements of their banking licenses and the county’s whole economy would have come to screeching halt without the Emergency Legislation.

The Nyi Landsbanki (and Nyi Glittnir and Nyi Kaupthing) where established to keep the domestic banking system functional not as an attempt at discriminating in favor of domestic depositors. The state has had to capitalise these institutions at great cost. Where the discrimination comes into play is because of the piss poor way in which the Emergency Legislation was written and because of the rather ill advised declarations of various Icelandic politicians.

And the Dane in #8 is right the only people who think Iceland is famous for anything other than Bjork and geysirs are Icelanders.

Oh, a correction: “…an RBS employee being fired, and going home to find out that their home has been seized, and being slapped with a court order to make monthly payments on the RBS debt, *************and their children being slapped with the same order, so that they might spend the odd decade or two paying off the debts of their parents*************.

I find that hard to believe, dsquared. How would the Icelandic President imagine that would come about?

#71: The President now also has the luxury of not having to deal with the political consequences, since his party were voted out; he’s able to undermine Johanna Sigurdadottir and play to nationalist sentiment to try and pretend to Icelanders that their economic disaster was the fault of global conditions and nefarious foreigners, rather than his party’s disastrous policies. Words really cannot express how venal and awful these politicians are. Also, Iceland has a long political history of making utterly outrageous claims and then getting away with it because it isn’t worth the trouble to other people, viz the “Cod War”.

I do feel sorry for Sigurðardóttir et al. It looks to me that her government was trying to work out a solution in good faith, despite presumably being less than thrilled with all these goings-on when they were out of power. Then they get stiffed by the president, it’s somehow their administration which gets a black eye from the international community, and the Independence Party cobags who aided and abetted this nonsense to begin with get to grandstand to the public with a referendum saying, “Do you guys want to let the current government tax you and give the money to foreigners, or do you support wiping the slate clean with magic? Plus, a new Icelandic pony for all!”

On the other hand, I suspect mr. mcmanus would note that this is what you get when the Left focuses exclusively on social democracy. Actual old-school leftists might have known what to do with weeks of popular demonstrations against bankers and the Independence Party, and it wouldn’t have left Ólafur free to sabotage the majority government for partisan benefit.

dsquared – the Icelandic president is a former MP from and Chairman of the Icelandic Labour Party which merged with the social democrats to form the current senior party of government! He’s one of the most hated people in the country as far as the Independent and Progressive party membership is concerned.

I’m afraid he’s one of Johanna Sigurdardottir’s long term political allies.

I’m getting very excited to hear which party it is that the president belongs to that was voted out. Clearly, dsquared is an expert on Icelandic politics.

Are we still sure invading isn’t an option? C’mon, seriously, what could go wrong?

Also, I don’t think that my question has been answered – would it be better for most Icelanders to default?

Perhaps a couple of clarifications are in order:
1) It is emphasized that the president of Iceland not be affiliated with a political party while s/he is in office. Before running for president, Ólafur Ragnar Grímsson was in politics, most notably in the labor party, with some briefer stops in two other parties. Practically the only political party in which he’s never been involved is Davíð Oddsson’s Independence Party.
2) While Iceland’s current president may deserve all kinds of criticism for all kinds of things he’s done while in office, the charge that he’s out to undermine the current government is unfounded and highly implausible.
3) The proposed referendum will not be on whether Iceland pays its dues to the UK and the Netherlands, a matter that is hardly up to popular choice. It will concern a particular arrangement of payment proposed by a particular bill. Very different.

#87 Ooh, I like this game. Pity the poor unemployed pizza-deliverers, lapdancers and coke dealers who might still be in gainful employment had we saved Lehman. Poor little Lehman.

To the moderator:

This is not intended as a public comment, but I couldn’t find another way to send a message.

For some reason my comments don’t seem to be passing moderation here. While my shot at the author’s “expertise” in Icelandic politics may have been cheap (my apologies), I have some difficulty grasping how it was considered more offensive than, say “If you ask me Icelanders are born front office types. They are arrogant and aggressive, if you walk down the street in Rejkavik the men will bodycheck you constantly rather than be polite” which made it through above, written by another commenter. And what was offensive about my other comment is beyond me.

If you could enlighten me, I’d be most grateful and happy to amend my ways in the future.

Best wishes,
Eyja

EDS – YOU CAN ALWAYS EMAIL US – BUT FIRST TIME COMMENTERS ALWAYS HAVE TO HAVE THEIR COMMENTS APPROVED IN ORDER TO MITIGATE THE PROBLEM OF SPAM.

What exactly does neoliberal mean in your post! The Government of David Oddsson (and later of Geir Haarde) followed some sort of corporatist hodge podge of policies whereby the state grew enormously while selling the crown jewels off to friends and allies. Thus, Landsbanki was privatized into the hands of unfit owners who the conservative Independence Party approved off while the regulators where neutered by putting party loyalist in charge. I’m not sure this fits the neoliberal label.

It may not fit the neoliberal label…but it fits the practical implementation to a T!

Poor little Lehman.

I actually feel a bit sorry for them as well, in that they were at least as good a candidate for a bailout as those that ended up receiving them. Aside from being a competitor of Goldman-Sachs, that is.

But unsurprisingly, I am yet again confused. If the president of Iceland actually loathes the Independence Party, why is he carrying the IP’s water for them? Or is he actually too stupid to see that he’s doing so?

“What would happen if The Royal Bank of Scotland refused to repay the government’s capital injections? The bank would go bankrupt and the employees would be out of a job, but nobody would suggest that the employees should have to repay the injections from their own pocket. Not even the owners would be liable for more than their share of the funds. The system is set up like this for a very specific reason. Not only would it be gravely unjust, but it would destroy the world economy in the long run if liability not was limited. Yet this is the fate you suggest for Iceland.”

Hmm. Let’s follow this line of logic. So what you are saying is that when a corporate entity cannot pay its debts, it goes bankrupt and disappears.
OK, let’s apply that to Iceland. The corporate entity that is Iceland the state declares bankruptcy, disappears, and its assets go to the creditors; so the Iceland joins the UK as its fifth province, subject, of course, now to UK law and government. Maybe, one day, in a few generations, we can give them some devolution, but at first central government control is probably best, given what a hash they made of things they last time they tried to run their own government.

I think the UK can live with such a deal.
How about it, Iceland? Is that the road you would like to go down?

Re: Ólafur (as I understand he is to be called), his political history is pretty complicated. In many ways he appears to have been a bit of a loose cannon and it is a complete mystery to me how he ever could be elected president of Iceland. It is a bit like Klaus squared with a healthy dose of Ghadaffi (or however the guy’s name is spelled) added while poor Johanna is trying to be the voice of reason. The Ólafur used to be a professor in political science – well: Shame to my profession.

Then there is the historical context: As every member of the Timberite community probably know, Iceland and the UK has a history of conflict and the UK should have thought twice before playing the “terrorist” card. (But then again measured action does not appear to be a British virtue, especially not when dealing with a weaker partner).

I have been told by an Icelandic colleague that Icelanders have an approach to risk which does set them apart from the other Nordic countries. Basically, the Icelandic live on the edge in the assumption that at one point they will be hit by uncontrollable disasters – volcano eruptions killing a large part of the population, the cod disappearing from one year to the other or prices on aluminium collapsing. So maybe, deep down and despite all judicial fineries, we will find an expectation among Icelanders that the Brits and the Dutch really ought to stop whining and get on with their lives. This was just another of those catastrophes (even if this one definitively was man-made).

And in case you want to know how we Danes see the Icelandic, you only need to head for your nearest DVD store and order a copy of Lars von Trier’s The Boss of It All.

Follow the links to our web pages and all will be revealed. Or alternatively, try “this link”:http://www.google.com/search?btnG=1&pws=0&q=%22henry+farrell%22 ;)

@93

>>Britain should announce that they’ll henceforth fish in Icelandic waters, and if interfered with, will sink Icelandic vessels.

And the Icelanders should hire some Iranians, equip them in swift patrol boats and scare the Brits away or into surrender.

And the Icelanders should hire some Iranians, equip them in swift patrol boats and scare the Brits away or into surrender.

It would be a splendid little war, don’t you think?

“1) Iceland nationalised Landsbanki. Therefore in principle the starting point would be that all of the liabilities of Landsbanki, wholesale deposits, local authorities and all, would become liabilities of the Icelandic sovereign.”

You mean like when the US took over GM, all GMs liabilities became sovereign debts? Oh that’s why GM workers have lost most of their contractual benefits. Thanks for explaining. Does anybody have an even dumber explanation? Apparently there are no limits to idiocy on this thread.

(Or am I missing some botched attempt at sarcasm here?)

“And then there’s the shocker that Worstall sounds like a voice of reason. That is definitely a first. Any explanation? Time-space singularity or what?”

Stopped clocks and all that…

Eyja, I have the utmost respect for your nuanced take and certainly know that I do not know everything of the case (although I can do probably a bit more than place Iceland on a map: I can do it correctly). But I hope you agree that one should be able to state in principle what should happen in a case like this even if one is not a main player. This is, in principle, not just a matter of the Icelandic people since you need aid from IMF, and such aid (which I believe you should get and the Greeks should get, no matter what has happened before) clearly is not just there for the asking. I don’t want to offend but it is a case of beggars can’t be choosers. Maybe the UK & Netherlands were insensitive and all that during the process but they had a rightful say in this matter; it’s not like this has come anywhere near the treatment of the Weimar Republic in the 20’s.

I’d like to add to Martin’s comment – the only person I know who was directly affected by the icesave debacle in the UK was earning 120k pounds a year and had the proceeds of the sale of their first house invested in Icesave, for the high interest rates. Why should I, who earns considerably less than that person, don’t have large savings and don’t own a home, have to have even a penny of my taxes bail them out for not understanding the high risk they were taking? I don’t get the impression that the depositors in icesave were your penny-pinching, bottle recycling OAPs.

But I suppose this is another one of those “suck it up” moments that the neoliberals love. The poor in Iceland have to wear the responsibility for their stupid leaders’ mistakes, and those of us who don’t have a couple of 10s of ks of pounds to invest in high risk accounts just have to sit back and suck when those with the power demand it. Another example of the reality of power that neoliberals love to smugly remind the rest of us about.

I agree with piglet too, the iceland-bashing here is pretty low, and it seems like another one of dsquared’s opinion-on-a-whim pieces which unravel as soon as someone who knows anything about the topic comes along.

Please identify “the poor in Iceland” who will be paying for this. With a Gini coefficient of 25 and a per cap GDP around the $60K mark, we should all be so poor. And there are still only 320,000 of them.

This comparison is by any standards, daft.

A more accurate comparison would be if subsidiaries of the RBS went on a spending spree and ended up owing the British government a crapload of money, the subsidiaries would file bankrupcy. In such a case the RBS wouldn’t be legally liable.

That’s exactly what happened in Iceland – privately owned banks and corporate chains of ridiculous proportions collected a debt that was blatantly clear already in 2007 by the British FSA (in regard to IceSave), and yet nothing was done, neither by the Icelandic FME, not the British FSA. Why ? Perhaps because in true human greed, they hoped that if they’d turn a blind eye, things might fix themselves, and they’d get a return on their invested penny ? Who knows.

At least, if making a comparison, do compare apples with apples. The reason for the “IceSave debt” is that when the Icelandic government stepped in and guaranteed the savings of *their subjects*, the British and Dutch governements paid *their subjects* the full amount of *their* savings, and then expected the Icelandic government to step up and pay back.

There’s NO precedent to such demands, NO international law, agreement or treaty that requires the Icelandic government to honour such demands, and it has been made clear by the authors of the laws about the savings insurance fund that it was NEVER ment to insure the complete collapse of the financial system of a whole country – only the collapse of a single bank.

Eyja,

OK, you were not pointing to my ignorance but just claiming everybody was ignorant that disagreed with you because ‘somebody that disagreed with you’ was ignorant ‘on something you are not ignorant of’. Glad to have that out of the way so I can dispense with talk of orifices.

So there is a dispute. There was an agreed way of settling the dispute. One party walks away from that agreement. What now? Do the other parties have to bend over? Do we all have to apologize for using figurative speech because it can be interpreted literally. Or do we note that there is a reason for the party walking away to be interested in this agreement, e.g. because it relies on its neighbours, the EU and the IMF (the last two of which include the other parties as members) to back it up financially?

I mean it’s all fine and dandy to walk away from an agreement and then cry like a baby if others point out that that agreement was something you needed.

I’m quite sure that the case details are complex but luckily for Iceland we’re not in this kind of humanitarian situation where e.g. (as has been pointed out) feels compelled not to enforce a responsibility another nation has towards it.

Eyja, you’re chucking around accusations that other people are “ignorant”, but you yourself are talking about “the UK using the terrorist law” and your only argument here appears to be that it’s in some way “not fair” unless the government of Iceland is able to make promises in order to get short-term help and then renege on them immediately after.

If people borrow a lot of money and then don’t pay it back, then they tend to lose their friends. That isn’t bullying people by saying “do what we say or you won’t have any friends”, it’s just noting that you can’t steal money from people and expect them to like it. The UK and Netherlands have agreed a long-dated repayment schedule with the government of Iceland, and the IMF had agreed a loan on that basis. Strangely, we all managed to carry out financial negotations without making bizarre and irresponsible threats to suddenly abandon our NATO obligations and hand over Keflavik airbase to the Russians.

Your government behaved stupidly, your bankers behaved stupidly and then your government behaved amazingly stupidly in trying to deal with the crisis your bankers created. You would do a lot better to get angry at them, not people who point out these unpleasant facts to you. (and for what it’s worth, I first heard of Landsbanki, Kaupthing et al rather more than fifteen months ago, when they ripped off a bunch of my friends very badly).

No one is making Iceland a scapegoat, people are just calling bullshit at the attempt to play the “poor innocent ganged up upon me” card. The same thing happened whdn the people holding junior debt in Chrysler tried to make a run of the mill Chapter 11 cramdown into jackbooted thugs robbing grandma of her pension and undoing hundreds of years of bankruptcy law. Life is tough all over.

Forgot to mention that Jake’s analogy – Chrysler debt-holders losing their money after a bailout – is self-defeating as well.

piglet – piglet!

it’s once again the bloody savers, the people with surplus money, who get bailed out by people like me, living from wage to wage.

Well, generally there’s absolutely nothing wrong with saving money and governments trying to protect the property of their citizens. Unless you want to go all class-warfare on us and are operating under the assumption that people who happen to have some money in the bank are all guilty or something. Also they see their assets being diminished when governments lower interest rates to values close to zero in order to combat yet another crisis. And then there are the cases like that of Westminster Council, which had 17 million tied up in Iceland – why should I, who happens to live there, get punished for what happened?

Pedantry corner: “had rushed in a bit less eagerly” = “had not rushed in so eagerly”.

Pedantry hyper-corner: that’s the “=” of assignment, as found in programming, rather than of equality or identity…

whatever initial plausibility that has is not even relevant unless that’s the right description of what went on

I put the word “generally” there for a reason, Martin W was extrapolating and I took it from there.

A more substantive point: yes, there may be small savers from the non-FT-reading class involved.

My point applies also to most members of the FT-reading class (hint: most of them are not super-rich). Martin seems to be saying that governments should not regulate the financial sector and that everybody who has more money than himself should be left hung out to dry – I simply don’t see why that should be the case, since there are many people who have worked hard to create some wealth and they should be provided with a certain amount of financial security, similar to those relying on pension funds for their retirement.

What – that you suspect it may be irrelevant here?

It’s really not my problem that you seem to be incapable of distinguishing between comments strictly to the topic at hand and more general comments, such as Martin’s and mine – the latter are fairly common to say the least and perfectly admissible.

fixed.

You need to get out more, e.g. take the tube or something. A lot of the people reading the FT are not rich in any commonly accepted sense of the word.

they are (…) financially savvy – – in particular wrt that central concept in the field of finance: risk.

Or they aren’t. I know tons of people who don’t have any talent for finance, but instead are simply very good at their jobs, which explains why some of them have a bit of money. And even if they are savvy, they might just want to invest in something solid with decent returns, so that they can pay for their children’s needs. If the trust in such solid investments is wholly being eroded and those that tend to invest conservatively are being punished, then we might as well resign ourselves to a Hobbesian natural state in this regard.

There is a lot of middle-class middle-ground here that you are needlessly throwing together with the much more extravagant shenanigans of high-finance. And Martin’s assumption that everybody who earns more than himself should be thrown to the wolves of capitalism conveys a similar attitude.

1. But I did distinguish.

2. But I said ‘stipulate’

3. See 2.

Since when does an ad hoc bailout, or even (as not applicable here) government underwriting, constitute ‘regulation’?

It wasn’t an ad hoc bailout, or Landsbanki would be still with us. it was the sodding deposit guarantee scheme we’ve had since whenever. Icesave didn’t do anything financially weird or expensive – just an instant access savings account with better interest rates than the high street banks. This is really getting ridiculous now.

I don’t have an argument. I don’t have an opinion — I’m reading this thread to see if dsquared’s version of events holds up under scrutiny.

And now I see that you don’t have an argument either.

145 & before, I mean: you’re going to get the last word in anyway, aren’t you?

Alex @142

It wasn’t an ad hoc bailout, or Landsbanki would be still with us
1. ‘Bailout’ referred to the savers, clearly enough.

it was the sodding deposit guarantee scheme we’ve had since whenever.

I was under the impression (including from what has been written here) that LB wasn’t covered by the FSA scheme, but instead only (notionally) by some Icelandic scheme. If not, hands up to being wrong on that. Is it wrong?

Icesave didn’t do anything financially weird or expensive
Don’t know about that – but thought it was in fact risky because overseas/not covered by the FSCS, and prima facie suspect because high yield. Still not clear that’s wrong.

Still, if it was all along covered by the FSCS, that is government underwriting and not really regulation, no? It also seems to mean (still going by what is written here) that the UK government didn’t ensure that LB/Iceland plc was tied in to reimbursing payments made under the UK scheme after LB went under (or was succeeded by some other entity).

I must say, putting your savings in a foreign bank is something I don’t think it would occur to many people to do in the first place. That’s if they have savings — as Martin says, many of us don’t. Almost a tenth of people here don’t have any kind of bank account btw (if memory serves).

Isn’t d2 working in the city or something? Why do we have to go as far as Iceland to find the “guilty parties”? And what about Ireland’s little offshore center …

But whether that was in fact the FS-sodding-CS or an Icelandic scheme is what decides whether the ridiculous or the non-ridiculous version is correct, isn’t it?

My understanding had been that as a non-UK bank, it would standardly be ‘covered’ by a scheme from its home country.

From what I can tell from a quick look at the FSA site – if the system hasn’t changed – the home country scheme is required by the EU Deposit Guarantee Schemes Directive to cover a minimum of €20 000, and that the bank has an option to ‘join with the FSA’ in a ‘top-up’ scheme if its coverage is less than £50 000. I don’t know whether (but doubt that) Icesave had joined such a scheme (at whatever cost, or under whatever scrutiny, if any of either). In either event, ‘the home state scheme would have lead responsibility for claims’, with the FSCS responsible only for any topped up element.

Does anyone else happen to know what the facts are? I realise it’s a bit late to ask….

152- why don’t we? In the end the current global system was shaped by the external pressure of Iceland, Ireland, Barbados and the like. Of course that does not mean that we should not also be dealing with the financial gurus, e.g. by making sure the assets they hold in such countries are in scope for Iceland paying its dues.

Further to #154 (and not to Chris B @155, et al passim – the argument is largely about what has elsewhere been called, perhaps a touch dismissively, the mood music), a ream of reasonably firm factoids:

It looks like Icesave was ‘topped up’ – and approved by the FSA as such – probably in 2006. So the rough equivalent of GBP18K or so per individual, human, creditor was supposed to be covered by the Icelandic scheme, and the remaining 32K by the FSCS. Approving the top up must have seemed, as they say, a good idea at the time. It’s quite possible it was, given lack of precognition. Don’t know if any security or insurance was paid to get top-up status, or what risk assessment was made by the FSA before guaranteeing this hefty tranche.

7 October 2008 – Landsbanki collapses and is nationalised.

8 October 2008 – Landsbanki Freezing Order is issued, on grounds that The Treasury believe that action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by certain persons who are the government of or resident of a country or territory outside the United Kingdom. The actions in question would appear to consist of no more than being the recipient of the relevant funds, or conveying the instruction, to whatever fiduciary agents were holding them, to transfer them. Which is stretching things a bit, a suitably clubbable silk might just successfully argue…

Whether this really has theoretical legal significance I dunno. But can’t see British judges (even if sometimes OK on John Bull stuff like Magna Carta) finding that the UK govt had committed some tort relating to interference in money or fiduciary gubbins, nor for that matter that the contractual rights and obligations don’t match up properly. Plenty of room to find that the law turns out to have prescribed (cf predicted) just the position that the UK govt vaguely assumed it kind of did.

Also 8 October 2008 – Darling announces ‘Because this is a branch of a foreign bank the first call would be on the Icelandic compensation scheme which, as far as I can see, hasn’t got any money in it.’ He states that in the exceptional circumstances all Icesave retail deposits in the UK will be 100% guaranteed. It’s unclear that ‘retail’ is the same thing, but this apparently means (or will later be claimed to have meant) individual human beings.

This means that those with >50K were indisputably going to be bailed out to the relevant extent (total: ‘b‘)by (the Treasury via) the FSCS. The first c. 18K or part thereof (total: ‘i‘) was a bailout inasmuch as the Icelandic scheme wasn’t going to pay up. That portion of deposits falling above the c. 18K mark but below the 50K mark (total: ‘f‘) had been approved for ‘topped up’ coverage by the FSA, and was I suppose in theory the safest part – unless ‘topping up’ and ‘lead responsibility’ were intended to indicate that the second, FSCS, tranche was conditional in some way on the first tranche being paid.

6 Nov 2008 – Darling anounces that the full bailout of savers will cost 800m. That seems to refer to the extra cost to the UK govt, i.e. b. So supposing he was about right, b = 0.8bn.

Daily Mail & This is Money, 4 January 2010 says UK savers had 4.56bn in the bank. So i+f+b = 4.56bn. It also says that 2.35bn is the bit which the Iceland fund was supposed to have paid, i.e. over which the argument is all about, i.e. i. So f is, I reckons, 1.41bn.

The same source has the total number of savers as 298 000. From this and the assistance of Excel, we also know that the mean deposit was very roughly around the 15K mark. And – I think – that an absolute maximum of about 130 000 depositors could have had more than c. 18K in the bank, and that an abs.max. of about 90 000 could have had more than 50K.

(And the Times on 17 Nov 2008 says that 70 councils in England and Wales have exposure totalling 643m. Such institutional investors (these are not ‘savers’, as in ‘who will save the savers?’) are not covered AFAICT by any guarantee scheme. Now there is a spanner in the ointment because this article also claims that the 800bn figure I’ve allocated to b is actually i+b. But that doesn’t add up so this factoid gets rejected.

15 June 2009 – the governmment, having begun the process of repaying all human creditors in full, manages to get the Iceland government to agree to pay the 2.3bn of the money UK plc has already made a big start in forking out, and certainly at least in electoral terms pretty much committed itself to. The 2.3bn is to bear interest and repayments are to start in 7 years, being completed 8 years later. This is also in some places described as involving the Iceland govt accepting that it is already liable for the money under EU rules (ultimately, stable treaty obligations).

27 Aug 2009 (on some accounts) – IMF starts bailing out the UK govt, by delaying its reconsideration/renewal of emergency funding to Iceland in order to apply pressure on the Iceland parliament to approve the deal.

…some other stuff happens…

Groundhog day, 17 November 2009 (Times): Iceland govt says it will pay, after IMF payment of 1.3bn had the week before been stalled at request of Netherlands, UK and, er, Germany.

…then the other stuff…

So re: #154; neither the purely ridiculous nor the purely non-ridiculous version (#142 etc) is entirely correct; there were a quite a lot of small-deposit-ors (which might kind-of weakens my case – in broad brush if not strictly – in the FT-based disagreement with novakant); the UK government were very quick to cover Icelandic liabilities, which got the Icelandic bank/govt off the hook in terms anyway of the lis that depositors had with them; and the UKG also covered 800m of windfall bailouts covering the >50K tranche.

Outstanding questions, for some other web trawl:

What was the risk profile (objectively, from the semi-subjective standpoint of the info that was in an appropriate sense available to customers; sellers; the FSA)?

Is it a good thing thing that the smallest investors were – in theory – entirely reliant on the foreign scheme? Might a ‘bottom-under’ domestic supplement be preferable to a top-up? I mean, the whole point of the thing is to be there when things are going tits up, so assuming all schemes are equal under such circumstances is not obvously a good way to go.

And were the UK sufficiently diligent in transforming the pre-existing debt by Iceland’s scheme owed to depositors into a separate intra-governmental ‘loan’? And did the way they did it contribute to letting the desperate (not an eval. term) Icelandic institutions off the hook in moral – or at least rhetorical – terms?

And what did that/those ad-hoc treaties actually say? Does that make a difference?

Was there mis-selling, how much, by whom?

And has the UKG’s stepping in meant that those responsible for mis-selling are, as is possibly the case with the Icelandic comp. scheme, kinda sorta bailed out, in terms of having the claims corresponding to their liabilities wiped out?

At least, unlike claims, there is always exactly enough blame to go round (and economics, as any fule know it, is only concerned with scarce commodities)

#159

lol, == has always been my favourite example of hackiness – it’s almost cute

How does one apply to do a guest post? I’m thinking of writing one entitled Eejits – How The Irish Persistently Elected A Bunch Of Neoliberal Crooks And Collapsed Their Economy Into The Bogs From Whence It Came, But Fuck ‘Em, Because We All Know What They’re Like.

Tim, #158 – the crucial bit is between 7 and 8 October in your chronology (the sequence of events is very murky and disputed by I agree with your version). The govt. of Iceland nationalised Landsbanki, seemingly guaranteeing its liabilities (this is certainly what it wanted creditors to believe). It then announced that the guarantee would only be extended to Icelandic depositors, which appears on the face of it to be illegal under EEA treaties. The UK government then acted to pass the freezing order, in the same way in which any creditor of an insolvent business would act to freeze assets when it had a suspicion that they were about to be moved offshore. Then there were all sorts of negotiations under which the UK agreed that (despite the fact that Landsbanki was nationalised and thus the institutional depositors had a pretty good claim against the Icelandic government on the face of it) it would treat this as if Icesave had been an insolvent subsidiary rather than a branch, paying out under the UK scheme in exchange for an indemnity from Iceland. So this was already a massive concession, which Iceland then tried to renege on.

#165 – or from a bank.

Actually it’s the trying-to-escape-the-consequences bit that I really don’t see. The Icelandic state isn’t in a position to force anybody to loan it any money. If they do something which the financial markets (whose confidence, as I understand it, we all need to regain, rather than the other way round) or the IMF don’t like, those financial markets or that institution will perforce say “we’re not lending to these people, they can’t be trusted”. If the referendum were to pass and that meant Iceland were to do something which was regarded as cheating, won’t they just tell Iceland to get stuffed?

If the referendum were to pass and that meant Iceland were to do something which was regarded as cheating, won’t they just tell Iceland to get stuffed?

this is the bit which Iceland (or rather, apparently, Financial Dynamics Ltd, on their behalf) are referring to as “bullying”. Iceland has got huge economic problems (because its banking system is bankrupt) and needs to carry out a painful process of readjustment. This readjustment could be made somewhat (not much, but noticeably) smoother by a loan from the IMF. In general, the IMF does not “lend into arrears”[1], by which is meant lending to countries that aren’t paying their debts or haven’t reached an agreement to reschedule them. Iceland looks like it would fall into this category, which is why it wanted to reach a rescheduling agreement with the UK and Netherlands, which is the one that the referendum is about. Meanwhile, Iceland’s PR people are wandering around claiming that the Icesave liability (which has already been reduced and over which the Icelandic negotiators have been very bad and not very candid negotiators) ought to be cancelled, seemingly on the ancient legal principles of “they called us terrorists!” and “we’re a small rich country and want the money”.

[1] This was the original principle – actually the IMF does a hell of a lot of lending into arrears these days, but it is all in the context of debt relief initiatives for the world’s poorest countries, of which Iceland is not even nearly one.

“social partners” – always a LOL moment there. It’s like when the French press report that a company is ‘menaced with the threat of a social plan’ [= structured redundancies, after a lot of shilly-shallying about]. Euphemism treadmill, here we come…

by the way, “writing” in #163 should be taken in its usual contextual sense of “thinking about writing”, certainly not in any sense that would discourage you from doing one instead.

Richard @165 – On what’s relevant, and on the line between default and ‘sneaky, cheeky default’: the matter of the debt being ‘acknowledged’ seems to be both a bit unclear and a bit irrelevant. Not being judges, what the Icelanders happened to think about their preexisting obligations is pretty irrelevant. Perhaps an admission of fact on which liability rests? But not that much fact was really disputed was it? Maybe ‘soft’ facts about ownership, corporate status.

Or does ‘acknowledging’ the debt mean ‘assuming the burden of the debt regardless of the preexisting situation’? If so, it’s not an acknowledgement, and taking on obligations under a new treaty is the only relevant thing (especially since the new treaty – it seems, on the slender grounds available – purported to extingush whatever was left of the previous relationship between the guarantee fund and the depositors, as did the UK govt paying them all back). So on that view the issue is – did they sign up to a binding treaty, and the answer is, it seems – not yet.

And I’m not quite so sure about what one should expect from your average state actor, either, in terms of self-denying punctiliousness…

the sequence of events aren’t [necessarily] that relevant

Well, my little timeline was about (a) looking at the UK side, in particular from the perspective of a government eager to keep savers happier than some of them have any right to expect, and acting precipitously and a (perhaps) a bit high-handedly; and (b) giving dates in case (ha!) anyone wanted to check the news stories.

On (a), I do really rather wonder somewhat whether the 800m payout was really so urgent, and really merited by the >50K brigade. (Or what Martin @115 said.)

Having had another look at the numbers gleaned earlier, and (obviously) assuming them correct:

(tranche boundary issues ignored)
.
tranche | tot(bn)| max payout| max poss persons| max poss .|min poss mean payout(K)
. . . . | . . . .| /person(K)| @ max payout(K).| persons(K)|tranche |cumulative
0-18K . | 2.35 . | 18 . . . .| 131. . . . . . .| ? . . . . |. . . . |
18K-50K | 1.41 . | 32 . . . .| 44 . . . . . . .| 131 . . . |11. . . | 29
50K+. . | 0.80 . | ?. . . . .| ?. . . . . . . .| 44. . . . |18. . . | 68

It’s possible to wring from them an absolute minimum possible figure for the mean payout to those falling into the top tranche – the UK govt saver-bailout tranche (b). That figure is 18K out of b, 68K in total received. This (an absolute minimum figure which is certainly an underestimate since it assumes that everybody falling into the middle tranche (f) also falls into b), suggests to me that the 0.8bn in entirely superogatory tax-funded bailouts for the top-tranche savers actually included quite a lot of seriously big amounts. Well, it didn’t take very long to do. That’s my excuse.

Also, whether or not they were all about to buy a hard-earned annuity with it, I still want to know whether there wasn’t someone else, like mis-sellers (is this way off?), who might have been made to stump up some contribution. Also, whether some more of that unscarce blame might attach itself to the FSA. I mean yes, ‘everyone’ (ahem) got the subprime/housing bubble wrong – and I don’t know if Landsbanki was an unpredictable consequence of that or similar – but did this high yield offshore account really look that innocuous, or ‘conservative’ at the time? (and what engels said @150)

What 166 and 175 said, and some addition. Another annoying characteristic of this debate, apart from baseless comparisons, has been the constant mingling of moralistic and legalistic arguments – e. g. “It’s the kind of play you’d expect from a sleazy property developer (excuse the tautology), not from a sovereign nation.” But that moralism is both legally irrelevant (the legal case against Iceland has absolutely not been established) and misplaced because those who are expected to hold the tab are not in general the ones who have caused the mess and/or benefited from it. This has been debated back and forth but let me restate it. Whatever happens in this case will be unfair to many people, whether Icelandic taxpayers, British taxpayers, or savings account holders. Most of these people shouldn’t suffer from the folly of neoliberal ideologues and irresponsible bankers. If there were any justice, Goldman Sachs wouldn’t be making record profits after being rescued by its cronies in the administration while teachers and bus drivers are being laid off all over the country as a result (at least partly) of financial industry recklessness. This thread has been such a waste, a waste of time and a waste of moralism and (probably faux) outrage that need to be directed elsewhere. If you want to moralize, Iceland is simply the wrong target and what I wonder is whether this target was chosen in order to avoid talking about the actual culprits.

Hey Richard J – I liked your post so much, I’m definitely, absolutely going to give you 500 pounds, and you’re welcome to sue me if I don’t.

But GM was actually insolvent, even if only for a month.
Iceland isn’t insolvent. And if Iceland is willing to to keep its failed banks solvent, it can’t default on only a part of the banks obligations. And I think it is legally obligated under EEA rules for up to 21,000 Euro per saver, whatever their country of origin.

Furthermore you can’t discriminate against the citizens of other EEA-Countries as a a member of EEA. So if Iceland guarantes the deposits of its citizens above the 21,000 limit, it has to do the same for the citizens of all other EEA countries.

There isn’t a “I don’t like the government of the UK” exception in the relevant EU rules, I think.

Well, there isn’t a “if they don’t suit us at a particular point in time, we’ll just break them”-exception in the EU deficit rules either … All this stuff falls into the “too big to fail area”, which is also why the comparison with GM is actually quite apt.

_what I wonder is whether this target was chosen in order to avoid talking about the actual culprits._

_an example that some people here don’t like to be reminded of, I wonder why Chris 155?_

Piglet, master of unsubstantiated innuendo. The simplest way to avoid talking about something is to avoid talking. And why I, in particular, have reasons not to like being reminded of developments in the US auto industry is quite obscure to me.

Iceland can’t decide to treat its own citizens any better than it treats UK citizens

As an aside, that the ECJ takes this point very seriously has led to many rather embarrassing defeats for tax authorities over the past two decades.

Even without citing the GM workers whose longstanding contractually promised benefits were nixed with the stroke of a pen

Just as an aside, am I alone in suspecting that this will one day happen to public sector pensions in one country or another?

ejh @187 am I alone in suspecting that this will one day happen to public sector pensions

No we are at least two. And plenty of private-pension-holders are acting on the same suspicion – bit of a race to the bottom/pisoner’s dilemma/self-fulfilling prophecy.

A propos nothing much, that consideration also moderates (or should) any vulgarly personal Spartist condemnation of them, of course…

What does that mean?

piglet:
“What planet do you live on Richard! Even without citing the GM workers who’s longstanding contractually promised benefits were nixed with the stroke of a pen (an example that some people here don’t like to be reminded of, I wonder why Chris 155?): ”

Because if people realized that ordinary working schmucks could be wiped out by corporate bankruptcy, they might not sympathize with banking elites collecting large bonuses after driving their companies into bankrupcty-except-for-a-government-bailout.

191- when you let low tax governments suck the life out of high tax governments (& specifically those that are small enough to get away with it) – then the latter will have no option but to cancel all of their built up benefits.

JoB @196 – to some extent, perhaps, but I don’t think an Iceland-style phenomenon is probably a very big component. This is perhaps a weak point and even a bit of illegtimate whataboutery, but just for some perspective, the Ministry of Defence’s own figures put the amount spent on one years’ fighting in Afghanistan at about the same amount as the Iceland figure. And as I’ve been wittering on about at some length, a figure of about 1/3 of that was gratuitously handed over to big-balance savers by the UK govt.

And those receiving that could not possibly (in logico-mathemtical terms) have received a mean payment from that tranche of less than 18K/person (as demonstrated subject to accurate input figures @174), and that is undoubtedly a massive underestimate of the true mean figure which I would guess is several times that amount. So the actual payouts to a significant number of these individuals seem likely to have been in the hundreds of thousands – hundreds of thousands of which they were apparently careless enough to dump into a largely unguaranteed overseas account. Or they were wrongly advised by commission-conflicted advisors who seem to have avoided any scrutiny, though I imagine that kind of thing is more likely to have affected those in the lowest tier.

Which is why I’m banging on about that, and leaving the Icelandic side of the unlimited-sum blame-game to others.

“Landsbanki’s liabilities were, explicitly, guaranteed by Iceland” .

Only a part, probably a small part, was guaranteed. This has already been discussed ad nauseam. My argument was a retort to the claim (56) “that all of the liabilities of Landsbanki, wholesale deposits, local authorities and all, would become liabilities of the Icelandic sovereign”, and to the subsequent claim in 180. That claim is patently false, can we lay this to rest now?

re: (1.1) – maybe that should be ‘net assets’

“compared to death all illness is negligeable”. Oh, hardly. I’ll trade you ten years of searing agony for instant oblivion any day. This is also part of my argument for nuking south-west Asia.

JoB: The ‘success’ of non-redistributive policies erodes the bases of acceptance of the redistributive policies

Yeah, OK let’s make an example of some group of people selected to represent (preferably accurately) Icelandic neoliberal excesses. I think the Icelanders themselves might have got the message though, whatever gets paid to whomever.

But meanwhile in the UK all the ‘savers’ (that’s savers with a nice trickle of income above inflation, thank you very much – to cover the opportunity cost of not spending it all straight away on pizza and cocaine perhaps) get all their money back, even when they are (from where I’m standing) rich as Croesus, straght away, as if it were their right. Because all that stuff about the entrepreneurial burden of risk isn’t to be taken too seriously when the downside comes along, and all this stuff is just a blip which is all the fault of Bernie Madoff or something, and everything’s fine once the latest crop of bad apples have been paraded in chains.

And Iceland as a whole is looking a bit like a Bernie Madoff, which may or may not be somewhat accurate so far as it goes, but is also, and more importantly, something of a distraction.

(Meanwhile people who just need a money transfer and storage utility to get their pay or dole cheque into food and clothing form have to use remarkaby similar-looking banks (thanks to the experiment with ‘free’ banking which made it seem costless to the politicians, and to some extent thanks to the big bribes to short-sighted building society members to get them to sell out). Thus they are exposed to every trick in the bankers’ well-developeed arsenal aimeed at trying and get them up to the very fullest extent of debt that banks think will give them the biggest trickle of minimum payments given the expected rate of individual ruin and misery…gasp for breath…)

Oh

Good point, actually.