Let the banks go down says Olafur Grimsson at the World Economic Forum in Davos.
Iceland is a small country, under 1 million citizens with a very homogeneous culture, so perhaps its lessons are not broadly applicable.
- Iceland Dismantles The Corrupt, Arrests 10 Rothschild Bankers, Then Issues Interpol Arrest Warrant For Rothschild Banker Sigurdur Einarsson!
- Hungary Orders Rothschild’s IMF To Vacate The Country: Now Issuing Debt-Free Money!
- Dodd Frank & Basel III Enacted Treason Against The United States: Wealth Funneled Into Rothschild’s [BOE] Bank Of England.
- The Reckoning: Released Tapes On Rothschild Rockefeller: Platform Of Video Re-Release Is Ecumenical ~ So If You’re Secular Based ~ You May Want To Take A Pass On This One! 4 Tapes From 1987!
Nevertheless, I have been proud of the Icelanders since they let their banks take the consequences – bankruptcy – of their greedy bets on derivatives and other financial “products”.
Recalling the history of a few years ago, the Icelandic government initially said that the innocent Icelandic citizens would bear the burden of the banks’ irresponsible practices. But mass protests led to a rethink.
The Icelandic President called for a referendum on the general public assuming bank debts. The bankers lost.
Citizens voted to let the banks fail. Iceland went through a rough patch but, after four years, is prospering. At least one Icelandic banker has gone to jail.
This all makes one think that Americans should have started protesting when Alan Greenspan arranged for a bailout of Long Term Capital Management in 1999. Or maybe earlier, when Chrysler was bailed out in the 1980s, because nothing is sacred about car companies, either.
- Obama Gives U.S. Corporations $76 Billion Worth Of Tax Credits via Fiscal Cliff: While Exploiting Working Americans aka; Rothschildism aka; Communism aka; Fascism aka; Banker’s Entitlements.
Bailing out businesses that make a mistake creates “moral hazard”. For the sake of super-profits, businesses [or households] are encouraged to take risks on the assumption that any losing bets will be covered by the all-suffering tax-payer.
About the Author: Virginia is retired from the Vanderbilt University Medical School and at Harvard’s before that. She has been a long time American Heritage activist, and has spent many years fighting our corrupt illegal immigration system.
Editing: Jim W. Dean
Fitch has upgraded the country to investment grade BBB – with stable outlook, expecting government debt to peak at 100pc of GDP.
The OECD’s latest forecast said growth will be 2.4pc this year, after 2.9pc in 2011.
Unemployment will fall from 7pc last year to 6.1pc this year and then 5.3pc in 2013.
The current account deficit was 11.2pc in 2010. It will shrink to 3.4pc this year, and will be almost disappear next year.
The strategy of devaluation behind capital controls has rescued the economy. (Yes, I know there is a dispute about exchange controls, but that is a detail.) The country has held its Nordic welfare together and preserved social cohesion. It is slowly prospering again, though private debt weighs heavy.
Nobody is forcing the elected government out of office or appointing technocrats as prime minister. The Althingi sits untrammeled in its island glory, the oldest parliament in the world (930 AD).
The outcome is a vindication of sovereign currencies and national central banks able to respond to shocks.
The contrast with the unemployment catastrophe and debt-deflation spirals across Europe’s arc of depression is by now crystal clear. Those EMU shroud-wavers who persist in arguing that exit from the Europe would be suicidal will have to start coming up with a better argument.
Is it now so clear the Iceland will join the EU and the euro? Don’t bet on it.
Here is the Fitch text:
Fitch Ratings has upgraded Iceland’s Long-term foreign currency Issuer Default Rating (IDR) to ‘BBB-‘ from ‘BB+’ and affirmed its Long-term local currency IDR at ‘BBB+‘. Its Short-term foreign currency IDR has also been upgraded to ‘F3’ from ‘B’ and its Country Ceiling to ‘BBB-‘ from ‘BB+’. The Outlooks on the Long-term ratings are Stable.
“The restoration of Iceland’s Long-term foreign currency rating to investment grade reflects the progress that has been made in restoring macroeconomic stability, pushing ahead with structural reform and rebuilding sovereign creditworthiness since the 2008 banking and currency crisis,” says Paul Rawkins, Senior Director in Fitch’s Sovereign Rating Group.
“Iceland has successfully exited its IMF programme and gained renewed access to international capital markets. A promising economic recovery is underway, financial sector restructuring is well-advanced, while public debt/GDP appears to be close to peaking on the back of a robust fiscal consolidation programme,” added Rawkins.
As the first country to suffer the full force of the global financial crisis, Iceland successfully completed a three-year IMF-supported rescue programme in August 2011. Despite some setbacks along the way, the programme laid the foundations for renewed access to international capital markets in mid-2011 and an encouraging rebound in economic growth to 3% for 2011 as a whole. Flexible labour and product markets and a floating exchange rate have facilitated the correction of external imbalances and contained the rise in unemployment, while the financial system has shrunk to one fifth of its former size.
Iceland has been among the front runners on fiscal consolidation in advanced economies: the primary deficit has contracted from 6.5% of GDP in 2009 to 0.5% in 2011 and Iceland appears to be on track to attain primary fiscal surpluses from 2012 and headline surpluses from 2014
Fitch believes that gross general government debt may have peaked at around 100% of GDP in 2011 (excluding potential Icesave liabilities); net debt is significantly lower at around 65% of GDP, reflecting appreciable deposits at the Central Bank (CBI). Barring further shocks, Iceland should see a sustained reduction in its public debt/GDP ratio from 2012, assuming economic recovery continues and the government adheres to its medium term fiscal targets. Ample general government deposits at the CBI and record foreign exchange reserves ameliorate near-term fiscal financing concerns. However, the risk of additional contingent liabilities migrating to the sovereign’s balance sheet remains high.
Iceland’s unorthodox crisis policy response has succeeded in preserving sovereign creditworthiness in the face of unprecedented financial sector distress. However, legacy issues remain, notably the protracted dispute over Icesave, an offshore branch of the failed Landsbanki that accepted foreign exchange deposits in the UK and the Netherlands, and the slow unwinding of capital controls imposed in 2008.
The impact of Icesave on Iceland’s sovereign creditworthiness has diminished over time and Landsbanki has begun to remunerate deposit liabilities. Nonetheless, Fitch considers that Icesave still has the capacity to raise public debt by 6%-13% of GDP, should an EFTA Court ruling go against Iceland. Resolution of Icesave will be important for restoring normal relations with external creditors and removing this uncertainty for public finances.
Capital controls continue to block repatriation of USD3bn-USD4bn of non-resident investment in ISK-denominated public debt and deposit instruments. Fitch acknowledges that Iceland’s exit from capital controls promises to be lengthy, given the underlying risks to macroeconomic stability, fiscal financing and the newly restructured commercial banks’ deposit base.
So far, Iceland has been relatively unaffected by the eurozone sovereign debt crisis and, although growth is expected to slow to 2%-2.5% in 2012-13, Fitch does not expect Iceland to slip back into recession. However, the private sector remains heavily indebted – household debt exceeds 200% of disposable income and corporate debt 210% of GDP – highlighting the need for further domestic debt restructuring, while the key export sector has been held back by capacity constraints and a lack of investment exacerbated in part by the slow unwinding of capital controls.
Fitch says that future sovereign rating actions will take a broad range of factors into account including continued economic recovery and fiscal consolidation and progress towards public and external debt reduction. Iceland is still a relatively high income country with standards of governance, human development and ease of doing business more akin to a high grade sovereign than low investment grade. Accelerated private sector domestic debt restructuring, a progressive unwinding of capital controls, normalisation of relations with external creditors and enduring monetary and exchange rate stability would help to further advance Iceland’s investment grade status.
- Icelandic Taxpayers Win Key Case Against European Establishment (thenewamerican.com)
- Icelandic People Vindicated……… (awakenlongford.wordpress.com)
- Iceland Was Right ~ We Were Wrong!
- Iceland: Here’s How You Deal with a Bank Crisis (ritholtz.com)
- Iceland refused to help FBI on WikiLeaks..gotta love these guys (seeker401.wordpress.com)
- How did Iceland recover? Report from Davos (beyondmoney.net)
- 1 Recall The Bailout, 2 Remove The Corrupt Politicians, 3 Pay NO Taxes Until 1&2 Are Completed!! Follow Iceland!! (politicalvelcraft.org)
- Its Time To Get ICELANDIC On Rothschild: Interpol Arrest Warrant For Einarsson Sigurdur! (politicalvelcraft.org)
- Olafur Ragnar Grimsson Iceland President ‘Let banks go bankrupt’ (publicbanking.wordpress.com)
- Iceland’s Hörður Torfason – How to Beat the Banksters (publicbanking.wordpress.com)
- Jailing Of The Rothschild Banking Mafia Has Begun: Iceland Leads The Way!