After the dust began to settle last year -- after the banks failed, the currency collapsed, the stock market crashed and the government fell -- the dazed inhabitants of Iceland woke up to another unpleasant problem: They owed, it seemed, some $5.3 billion to more than 300,000 angry people in the Netherlands and Britain.
These were the customers of Icesave, a now notorious online retail branch of the Icelandic bank Landsbanki, which went bankrupt in October 2008 along with 85 percent of Iceland's banking system. The British and Dutch governments reimbursed their citizens, but then demanded that Iceland repay the money, the equivalent of $65,000 per household here, plus interest.
To put it in perspective, it is as if American taxpayers were being forced to pay $5 trillion (plus interest) to reimburse customers of the Japanese branch of a failed private American bank, said Magnus Arni Skulason, the head of InDefence, a group agitating for a better deal.
It isn't is as if the average Icelander didn't benefit somewhat from influx of money which arrived during the nation's heyday as a center of international finance. But, I somewhat suspect that the movers & shakers who took risk which yielded massive fortunes are somewhat more comfortable than the average Icelander now. Yes, their paper wealth is not what it was, but they were living far above the median consumption rate anyhow. There is austerity for the masses, and "austerity" for the elite.
There don't seem any good solutions here. The elites of Iceland were either crooked or stupid, or some combination of both, during the years of high rolling. Now they've left their nation holding the bag. And this is Iceland. A tiny Nordic nations which is (was?) characterized by clean government and an efficient elite.
Okay, I haven't followed the Iceland bank failures, but the $65,000 per household had to go somewhere. Where? Was it "invested" in the now collapsed stock market?
I'm assuming that Iceland has at least as many lampposts as it does bankers, so I'm not sure that no good solutions exist...
just an fyi, i looked up info on some of the rich dudes who caused this problem a while back. lots had left the country, so they'd have to extradite and stuff.
I wrote about this awhile back (at the link). Right up until the collapse Iceland was the poster child for financial deregulation. The Mont Pelerin Society, the international neoliberal think tank, had their meeting there in 2005. As late as November, 2007 people were talking about Icandic miracle: Deregulation brings boom time to Iceland -- That's less than two years and three months ago.
The disaster is so recent that the full reaction hasn't been seen yet; basically there's been a only minimal and probably successful immediate term rescue effort, but recovery will be very slow. The full effects haven't been felt yet, and as far as I can tell there's been no real accountability.
Considering the magnitude of the disaster (at one point the stock market had lost 40%+ of its value, and many people saw their retirement plans destroyed. I would have expected a lot more noise.
The American political system seems incapable of responding. Both parties were implicated, the Republicans (and Republican-lite deregulating Democrats) more so in my opinion, and neither one seems to have learned anything. The media coverage of economics was imbecile before and it's imbecile now.
one thing is for sure, when the road comes to fruition jaime dimon, lloyd blankfein and vikram pandit will be sitting around a fire somewhere roasting some rube's juicy baby over a spit.
The obvious counterpoint here is that UK and Netherlands didn't have to bail out the depositors of the local branches of Icelandic banks. So why would they expect to stick the bill to the Icelandic government ex-post?