Iceland Told the Banks to Pound Sand … And Thereby Saved Its Economy...
Iceland told the banks to pound sand. And Iceland’s economy is doing much better than virtually all of the country’s who have let the banks push them around.
Barry Ritholtz noted in May:
Rather than bailout the banks — Iceland could not have done so even if they wanted to — they guaranteed deposits (the way our FDIC does), and let the normal capitalistic process of failure run its course.
They are now much much better for it than the countries like the US and Ireland who did not.
Bloomberg pointed out in February:
Unlike other nations, including the U.S. and Ireland, which injected billions of dollars of capital into their financial institutions to keep them afloat, Iceland placed its biggest lenders in receivership. It chose not to protect creditors of the country’s banks, whose assets had ballooned to $209 billion, 11 times gross domestic product.
“Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”
Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital — 46 billion euros ($64 billion) so far — to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December.
Countries with larger banking systems can follow Iceland’s example, says Adriaan van der Knaap, a managing director at UBS AG.
“It wouldn’t upset the financial system,” says Van der Knaap, who has advised Iceland’s bank resolution committees.
Arni Pall Arnason, 44, Iceland’s minister of economic affairs, says the decision to make debt holders share the pain saved the country’s future.
“If we’d guaranteed all the banks’ liabilities, we’d be in the same situation as Ireland,” says Arnason, whose Social Democratic Alliance was a junior coalition partner in the Haarde government.
“In the beginning, banks and other financial institutions in Europe were telling us, ‘Never again will we lend to you,’” Einarsdottir says. “Then it was 10 years, then 5. Now they say they might soon be ready to lend again.”
Even the IMF praises Iceland’s strategy:
As the first country to experience the full force of the global economic crisis, Iceland is now held up as an example by some of how to overcome deep economic dislocation without undoing the social fabric.
Greece Faces the Same Choice
As Robert Reich notes, the same choice – telling the foreign banks to pound sand or caving in – is now faced by Greece:
Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.
(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)
We’ve been here before, remember? Here in the United States, at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street.
The difference is, we didn’t hold a referendum. Instead, the Bush administration told Congress the nation risked “economic Armageddon” if it didn’t immediately authorize a giant bailout of the Street – with no strings attached. [Our comment: Indeed, Paulson threatened martial law if the bailouts weren't approved.] Of course Congress hastily agreed. Hank Paulson, Ben Bernanke, and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more.
So instead of allowing the Street to live with the consequences of its negligence, we bailed it out – and allowed the Main Streets of America to suffer the consequences.
If Americans had been consulted about the bank bailout, I doubt it would have happened the way it did. [Our comment: Polls showedthat Americans were overwhelmingly against the bailouts. And see this.] At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.
But Americans weren’t really consulted. It was an inside job....like 9/11....
"Over the last decade, Greece has been the largest importer of conventional military hardware in the European Union...."Sounds like a military dictatorship in Greece is exactly what Germany wants - because they would be a great customer.....LOLhttp://blog.alexanderhiggins.com/2011/11/01/greece-facing-military-coup-civil-war-imminent-government-collapse-happen-tonight-79831/
Greek Army Threatens Military Coup Saying “We Will Not Be Sold To Foreign Powers” Ahead Of IMF Bailout Loan Vote Sparking Fears Of Military Uprisings And Civil Wars Spreading Across Europe. Military Officers And Police Forces Are Now Joining The Protests.
I recently wrote that the Greek Revolution has succeeded and the Government agreed to step down and create a new Government.
Several news agencies out of Europe are reporting that Army and Police officers have joined the people in the riots against the banks to protest what is being perceived by European nationals as the sale of national sovereignty to foreign powers....Is A Greek Military Overhaul An Attempt To Prevent A Coup?
While the calls for G-Pap's resignation grow louder and Merkozy's blood pressure rises, we couldn't help but notice a potentially significant action among the top military leaders in Greece. Athens News reports that the Minister of Defense is proposing a complete replacement of the country's 'top brass'.
From Athens News: Top Brass Replaced:
In a surprise move, the defence minister proposed on Tuesday evening the complete replacement of the country’s top brass.
At an extraordinary meeting of the Government Council of Foreign Affairs and Defence (Kysea), which comprises the prime minister and other key cabinet members, Defence Minister Panos Beglitis proposed the following changes to the army, navy and air force and the general staff:
General Ioannis Giagkos, chief of the Greek National Defence General Staff, to be replaced by Lieutenant General Michalis Kostarakos
Lieutenant General Fragkos Fragkoulis, chief of the Greek Army General Staff, to be replaced by lieutenant general Konstantinos Zazias
Lieutenant General Vasilios Klokozas, chief of the Greek Air Force, to be replaced by air marshal Antonis Tsantirakis
Vice-Admiral Dimitrios Elefsiniotis, chief of the Greek Navy General Staff, to be replaced by Rear-Admiral Kosmas Christidis
It is understood that the personnel changes took many members of the government and of the armed forces by surprise.
What better way to consolidate power than to bring in 'your guys' as the country lurches closer to all out chaos?
“Instead of pouring euros down the drain, it would be much wiser for Germany to sponsor a military coup and solve the problem that way.” No, this extract is not from a fascist blog. It is from Forbes magazine and it’s just another one of the provocative articles that follow this insane ongoing anti-Greece campaign of international media.
The article circulates a joke going around the financial markets at the moment that Greece’s only chance to be saved is a junta. “What’s so sad, or bitter if you prefer, about the joke is that, if we ignore the little problem of it being a military dictatorship, this would in fact be a good solution to Greek woes.” This “little problem” Mr. Worstall so cynically refers to, doesn’t sound very funny to Greek people who have already been through one dictatorship, from 1969 to 1974 during which Greek people suffered enormously.
In fact in two weeks time Greeks will be celebrating the anniversary of the Athens Polytechnic uprising in 1973, an open anti-junta, revolt that ended in bloodshed in the early morning of November 17 after a tank crashed through the gates of the Technical University of Athens. This revolt was the beginning of the junta’s collapse. What’s really ironic is that the junta was in fact the result of foreign interference and oppression by right-wing governments that simply didn’t care about their people’s fate. Thirty seven years on, Greeks experience a new junta, this time financial while the prejudice against them has taken absurd proportions...Arms dealers and loan peddlers took down Greece
The eyes of the world are on Greece as the beleaguered country lurches toward bankruptcy, threatening to drag the global economy into another recession. There has been much finger wagging from Germany about the need for Greek fiscal restraint and discipline, but what role have the German arms industry and predatory European banks played in creating this crisis?
Over the last decade, Greece has been the largest importer of conventional military hardware in the European Union. Greek military spending as a percentage of GDP is more than any other EU member and tops even nations such as Pakistan, which is engaged in a variety of ongoing conflicts.
Greece now has more than 1,200 battle tanks, 1,700 armored personnel carriers, 300 fighter jets (including 156 F-16s), eight submarines and more than 40 frigates, gunboats and miscellaneous missile carriers. The bloated Greek military now has an air force similar in size to Germany’s — a front-line member of NATO with an economy 10 times larger than Greece and eight times as many people.
...The balance was probably tipped on 28 October, the anniversary of Greek entry into the second world war. Traditionally there are student and military parades in urban centers, the largest in Thessaloniki. In an unprecedented act, crowds of bystanders disrupted parades across the country, including in Thessaloniki. Government representatives were hounded and the president was called a traitor. The mechanisms of symbolic and ideological power of the Greek state buckled.
The reaction of the crowd signaled a development that has been in the offing for a while. By imposing ruthless austerity, privatization and liberalization, the EU has eventually succeeded in igniting the nationalist sentiment of Greeks. The rejection of the latest bailout has taken a nationalist tinge, often directed against perceived German domination.
Lest it be misunderstood, this is not yet virulent nationalism. It is more a reaction to the loss of national sovereignty and independence that would result from the permanent monitoring of Greek finances by EU bureaucrats, and from the plan to sell a huge range of public assets to pay off debt.
It is also a reaction to the palpable weakening of the democratic process in the course of the crisis. Papandreou is fully aware of the risk of being branded a traitor, fairly or unfairly. He is also aware of the advancing collapse of his government. But he is reluctant to hold fresh elections because he knows his party would be destroyed. And so he has opted for the desperate gamble of the referendum in the hope of buying time, as well as scaring people with the "euro or drachma" question....