FedUpUSA

Archive for the ‘Iceland’ Category

As global equity markets gap downward the trading day after I suggested Watch The Pandemic Bank Flu Spread, can kicking will get progressively harder from this point on. As I have said in my many interviews, the only way out of this is debt destruction, which will crush big European banks leveraged up on debt marked at par of close enough to it.

Having made clear that default was the only way out, Iceland has once again proven me correct. And just to jog the memory, I made it clear that default was the only way out nearly two years ago…

Online Spreadsheets (professional and institutional subscribers only)

• Greek Default Restructuring Scenario Analysis
• Greek Default Restructuring Scenario Analysiswith Sustainable Debt/GDP Limits and Haircuts
• Portugal’s Debt Ridden Finances: An Analysis of Haircuts, Restructuring and Strategy – Professional Analysis
• The Spain Sovereign Debt Haircut Analysis for Professional/Institutional Subscribers
• Ireland Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts

Bloomberg reports: Iceland May Hold Krona Auctions Within Weeks

The island, whose banks defaulted on $85 billion in 2008, is moving into the final stages of its resurrection plan as the last vestiges of crisis management are gradually removed. Iceland’s decision, taken together with the International Monetary Fund, to impose capital controls three years ago was key to surviving the bleakest moments of the crisis and helped prevent an all-out run on the island’s assets, Gudmundsson said.

“Without the capital controls it would have been much more difficult to ensure stability in the exchange rate, calling for much higher interest rates and an inability to shelter the domestic economy as well as we did,” he said. “With the turbulence in the international markets lately, the capital controls have sheltered Iceland considerably, since there’s no way of doing a run on the financing of the Icelandic state or the financing of the Icelandic banks.”

It is clear that capital controls are coming to the EU, and I’m sure there already in place in some form or fashion. It is quite ironic how the so-called “in the know” pundits alleged that Iceland would be osctrazied from the captial markets for defaulting when they are the ones actually
returning to the markets as the TPTB in the EU are being shunned. Just default already and get it over with, or you just may find yourself working for an Icelandic boss momentarily… You can try to save all of your banks and end up saving no banks at all, or you can go the logical route – the route that Iceland democratically allowed their populace to choose, which also so happened to be the right way. Hmmm… Democaracy! Capitalism! We just don’t seem to be seeing those concepts in the Euro area much these days…

Outperforming Euro Area

Iceland’s economy will grow faster than the euro-area average this year and next, the IMF estimated in September. The cost of insuring against an Icelandic default, using credit default swaps, is lower than the average for the euro area.

Iceland’s economy will grow 2.5 percent this year and next, versus 1.6 percent in the euro area this year and 1.1 percent in 2012, the IMF said Sept. 20. Next year, Iceland’s current account surplus will widen to 3.2 percent of the economy and unemployment will be 6 percent, versus 9.9 percent joblessness in the euro area, the fund said.

The stabilization of the island’s economy has allowed the central bank to press ahead with capital liberalizations that the government estimates won’t be fully dropped until 2013. The approach allows foreign investors eager to offload their krona holdings to transfer them to foreign or local investors willing to commit long-term to the island, according to the central bank.

‘Nuff said. Now, on to my other premonitions, predilections and predictions for which my subscribers pay me so dearly for… CNBC reports Moody’s Warns On French Rating Outlook

A rise in interest rates on French government debt and weaker growth prospects could be negative for the outlook on France’s credit rating, Moody’s warned in a report on Monday, adding to pressure on European debt markets.

Worries that France has the weakest economic fundamentals among the euro’s six AAA-rated countries have drawn the euro zone’s second largest economy into the firing line in the debt crisis this month.

The rating agency said the deteriorating market climate was a threat to the country’s credit outlook, though not at this stage to its actual rating.

“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” Senior Credit Officer Alexander Kockerbeck said in Moody’s Weekly Credit Outlook dated Nov.21.

“As we noted in recent publications, the deterioration in debt metrics and the potential for further liabilities to emerge are exerting pressure on France’s creditworthiness and the stable outlook (though not at this stage the level) of the government’s Aaa debt rating,” the Moody’s note read.

The yield differential between French and German 10-year government bonds rose above 200 basis points last week, a new euro-era high.

Moody’s said that at that spread level, France pays nearly twice as much as Germany for long-term funding, adding that a 100 basis point increase in yields roughly equates to an additional three billion euros in yearly funding costs.

In early Monday trade, the French 10-year spread was up about 20 basis points at 167 bps following publication of Moody’s report but remained well short of the 202 bps hit last week.

The CAC 40 index, which was down 1.7 percent in opening trade, was down 2.2 percent after an hour of trade.

“With the government’s forecast for real GDP growth of a mere one percent in 2012, a higher interest burden will make achieving targeted fiscal deficit reduction more difficult,” Moody’s said.

On Oct 17, Moody’s said it could place France on negative outlook in the next three months if the costs for helping to bail out banks and other euro zone members overstretched its budget.

“The French social model cannot be financed if the French economy’s potential is not preserved.

The stress on banks’ balance sheets can lead to further increases of liabilities on the government’s balance sheet when further state support to banks is needed, it added.

The events are unfolding like clockwork. Just go back a few months – or a year – or two years – in the BoomBustBlog archives for the Eurozone topic…

Italy’s Woes Spell ‘Nightmare’ for BNP – Just As I Predicted But Everybody Is Missing The Point!!!

BNP, the Fastest Running Bank In Europe? Banque BNP Exécuter

I think we may be there.

The IMF entered the picture in November 2008, advising the government to reconstruct the banking system in a way that “includes measures to ensure fair valuation of assets [and] maximize asset recovery.” The government created three “good” new banks from the ruins of its failed banks, transferring loans from the old to the new banks at a discount of up to 70 percent to reflect their fair value, based on independent third party valuation.

The vultures became owners of two out of three new Icelandic banks. On IMF advice the government negotiated an agreement so loose as to give them a hunting license on Icelandic households and businesses. The new banks acted much as U.S. collection agencies do when they buy bad credit-card debts, bank loans or unpaid bills from retailers at 30% of face value and then hound the debtors to squeeze out as much as they can, by hook or by crook.

A hunting license eh?

There comes a time when one must recognize that all “shooting galleries” where the target is a living human on the end of the range inherently results in the target having the right to shoot back.

That is, there is no such thing as a one-way hunting festival when the quarry is another human being.

Those who refuse to recognize that this is the moral equivalent of an armed takeover of the nation are fools.  The culprits here are “vulture funds” that came in and “recapitalized” but then at the same time are short-term trading on these distressed situations.  Their intent of course is to make as much money as possible, but there is no harm and no foul to be done to the people responsible — instead, the household is the one who takes in the seat, just as has happened here in the United States.

At some point the people must rise and put a stop to this.  The IMF has done this repeatedly through history in various nations, and there is no reason for any sovereign people to stand for it.  These are not your friends and they have every intention of screwing you to the maximum degree.

A few years ago Icelanders held a literal “torch vigil”; the implicit threat was clear.  It appears to be time for another one, and if the vultures that are involved in this charade are not immediately shown the door by the government the unfortunate reality is that the people may have to eject both the banksters and the government by whatever means are necessary.

An Italian radio program’s story about Iceland’s on-going revolution is a stunning example of how little our media tells us about the rest of the world. Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt.  The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.

As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here’s why:

Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors.  But as investments grew, so did the banks’ foreign debt.  In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent.  The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro.  At the end of the year Iceland declared bankruptcy.

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution.  But only after much pain.

Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures.  The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros.  This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country.  As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF.  The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North.  But if we had accepted, we would have become the Haiti of the North.” (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)

In the March 2010 referendum, 93% voted against repayment of the debt.  The IMF immediately froze its loan.  But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis.  Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.

But Icelanders didn’t stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money.  (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish constitution being that the word ‘president’ replaced the word ‘king’.)

To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.

Some readers will remember that Iceland’s ninth century agrarian collapse was featured in Jared Diamond’s book by the same name. Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution.  And those of Italy, Spain and Portugal are facing the same threat.

They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.     

That’s why it is not in the news anymore.

Deena Stryker is an American writer that has lived in six different countries, is fluent in four languages and a published writer in three. She looks at the big picture from a systems and spiritual point of view.  SACSIS

Icelanders angry with the slow pace of the country’s economic recovery threw eggs at members of parliament and other politicians as they headed to mass in Reykjavik Saturday. The president’s wife, Dorrit Moussaieff, climbed over a barricade to mingle with the protesters.

More than 1,000 protesters were gathered outside the mass that preceded the beginning of a new parliamentary session. That’s a large protest for Iceland, a nation of just 320,000 inhabitants. The country had enjoyed a rapidly expanding economy until the credit crunch hit hard in 2008. Organizers presented the government with a 34,000 signature petition demanding more debt relief for ordinary citizens – and less lenience with the banks at the root of the crisis.

Most protesters stuck to making noise on pots and pans, but some threw eggs at the politicians. One legislator was slightly injured, and had to be helped up by his colleagues.

“People feel like they’ll never be able to repay their loans”

Halldor Sigurdsson, 46, works in a metal recycling plant in Reykjavik.

I have been filming all the protests in Iceland since the crisis started. The Icelandic press doesn’t cover them very well, so I want to get the images out to the world.

It seemed to me like several thousand protesters came out, and the vast majority of them were peaceful. A few people threw eggs, but they were quickly stopped by others. Iceland is a small country of 320,000 people; we are all related to each other pretty closely, so we try to stay civil.

The president’s wife, as you can see in the video, pushed past the police to go meet the protesters. [Her husband, Olafur Ragnar Grimsson, is not the top politician country; that role is played by the prime minister.] While some people think she’s a fraud doing this for publicity, I think it was very positive to show people that she wants to talk to them, that the elite are not in an ivory tower looking down on everyone else.

Icelanders just don’t trust the government anymore. Members of parliament are helping the bankers, who have kept their high-paying jobs; no one is being sentenced to jail. People think the special investigator in charge for investigating financial crimes is a joke.

Meanwhile, we are paying for the mistakes of the banks and of politicians. Many people here are losing their houses and can’t pay off their loans, while at the same time companies as well as some members of the government have had their loans written off.

“The situation will take time and patience to fix”

In Iceland, when inflation goes up, loan repayments go up as well. So people feel like they’re never going to see the end of it. Many of those who took out loans before the crisis are now repaying them many times over. So the protesters’ main demand is to stop what they owe from growing with inflation.

There’s also the problem of taxes. The government is heavily taxing everything it can – gas, alcohol, cigarettes. [It has also increased income tax and VAT taxes.] Many people have gone abroad to flee unemployment. [Iceland’s unemployment rate is 6.7 percent compared to 2.8 percent in early 2008, before the crisis hit].

It’s not all bad, though. There is some slow progress. The government is offering tax breaks to foreign companies to bring them to Iceland. So new jobs are beginning to be created. This situation will take time and patience to fix.”

Observers France 24

NOTE: For those unfamiliar. The Icelandic people have removed their government wholesale, TWICE, only to have the new representatives continue to vote in favor of more bank bailouts and more tax money to be transferred from the people to the bankers. So, it would appear there is a lesson to be learnt for us all. It’s the debt-denominated, private-banker controlled monetary system that is the problem. It has a stranglehold on each and every politician that ever sets foot in office.

Iceland is free.  And it will remain so, so long as her people wish to  remain autonomous of the foreign domination of her would-be masters — in this  case, international bankers.

On April 9, the fiercely independent people of island-nation defeated a  referendum that would have bailed out the UK and the Netherlands who had covered  the deposits of British and Dutch investors who had lost funds in Icesave bank  in 2008.

At the time of the bank’s failure, Iceland refused to cover the losses.   But the UK and Netherlands nonetheless have demanded that Iceland repay them for  the “loan” as a condition for admission into the European Union.

In response, the Icelandic people have told Europe to go pound sand. The  final vote was 103,207 to 69,462, or 58.9 percent to 39.7 percent.    “Taxpayers should not be responsible for paying the debts of a private  institution,” said Sigriur Andersen, a spokeswoman for the Advice group that  opposed the bailout.

A similar referendum in 2009 on the issue, although with harsher terms, found  93.2 percent of the Icelandic electorate rejecting a proposal to guarantee the  deposits of foreign investors who had funds in the Icelandic bank. The  referendum was invoked when President Olafur Ragnur Grimmson vetoed legislation  the Althingi, Iceland’s parliament, had passed to pay back the British and  Dutch.

Under the terms of the agreement, Iceland  would have had to pay £2.35 billion to the UK, and €1.32 billion to the  Netherlands by 2046 at a 3 percent interest rate.  Its rejection for  the second time by Iceland is a testament to its people, who feel they should  bear no responsibility for the losses of foreigners endured in the financial  crisis.

That opposition to bailouts led to Iceland’s decision to allow the bank to  fail in 2008.  Not that the taxpayers there could have afforded to.   As  noted by Bloomberg News, at the time the crisis hit in 2008, “the banks had  debts equal to 10 times Iceland’s $12 billion GDP.”

“These were private banks and we didn’t pump money into them in order to keep  them going; the state did not shoulder the responsibility of the failed private  banks,” Iceland President Olafur Grimsson told Bloomberg Television.

The voters’ rejection came despite threats to isolate Iceland from funding in  international financial institutions.  Iceland’s national debt has already  been downgraded by credit rating agencies, and now those same agencies have  promised to do so once again as punishment for defying the will of international  bankers.

This is just the latest in the long drama since 2008 of global institutions  refusing to take losses in the financial crisis.  Threats of a global  economic depression and claims of being “too big to fail” have equated to a  loaded gun to the heads of representative governments in the U.S. and  Europe.  Iceland is of particular interest because it did not bail out its  banks like Ireland did, or foreign ones like the U.S. did.

If that fervor catches on amongst taxpayers worldwide, as it has in Iceland  and with the tea party movement in America, the banks would have something to  fear; that is, the inability to draw from limitless amounts of funding from  gullible government officials and central banks.  It appears that the root  cause is government guarantees, whether explicit or implicit, on risk-taking by  the banks.

Ultimately, such guarantees are not necessary to maintain full employment or  even prop up an economy with growth, they are simply designed to allow these  international institutions to overleverage and increase their profit margins in  good times — and to avoid catastrophic losses in bad times.

The lesson here is instructive across the pond, but it is a chilling  one.  If the U.S. — or any sovereign for that matter — attempts to  restructure their debts, or to force private investors to take a haircut on  their own foolish gambles, these international institutions have promised the  equivalent of economic war in response.  However, the alternative is for  representative governments to sacrifice their independence to a cadre of  faceless bankers who share no allegiance to any nation.

It is the conflict that has already defined the beginning of the  21^st Century.  The question is whether free peoples will choose  to remain free, as Iceland has, or to submit.

Bill Wilson is the President of Americans for Limited Government. You can  follow Bill on Twitter at @BillWilsonALG.
Bill Wilson for NetRightDaily

A protest movement that started in Spain has now spread to Italy. The Spanish government has banned protests, but that has only encouraged more protests.

I picked the story up two days ago in Protests Mount in Spain; Sovereign Debt Crisis to Follow

Acting on a tip, the New York Times picked up the story a day later in Protesters Rally in Madrid Despite Ban.

Protest Images

Here are a few protest images by Juan Luis Sanchez on Yfrog.

Spain’s Icelandic revolt

Protests in Iceland helped bring down the Icelandic government and stopped the bailouts of banks at the expense of Icelandic taxpayers. Can the same thing happen in Spain?

Please consider Spain’s Icelandic revolt

After passively submitting to the crisis, young Spaniards have finally taken to the street. Breaking out on the eve of municipal elections, the protests of recent days have been inspired by those in Iceland that led to the fall of the government in Reykjavik.

One morning in October 2008, Torfason Hördur turned up at what Icelanders call the “Althing”, the Icelandic parliament in the capital city, Reykjavik. By then, the country’s biggest bank, the Kaupthing, had already gone into receivership and the Icelandic financial system itself was in danger of going under. Torfason, with his guitar, grabbed a microphone and invited people to talk about their dissatisfaction with the freefall of their country and to speak their minds.

A movement spawned by the internet

But those voices calling for real democracy are not just being raised in Iceland, a country of about 320,000 inhabitants. Here in Spain, the umbrella organisation for various Spanish movements – Democracia Real Ya (Real Democracy Now) – already lists among its proposals some 40 points ranging from controlling parliamentary absenteeism to reducing military spending through to abolishing the so-called Sinde law (a law restricting on-line infringements of copyright).

The demonstrations have broadened spontaneously, as was the case for those who rallied under the umbrellas of the “alternative globalisation” movements, and have evolved, one decade after the World Social Forum in Porto Alegre, Brazil, on a more modest stage than the one demonstrators faced in the past at the World Economic Forum of the global elite in Davos, Switzerland.

All this is happening at astonishing speed via the Internet, which has amplified the echo of discontent and opened the lanes of cyberactivism to groups such as Anonymous, notable for intervening against companies like PayPal and Visa during the advocacy campaign for Wikileaks chief Julian Assange. Yet it was also there at the beginning of the revolts in the Arab world, to help people get round the censorship of the Tunisian and Egyptian dictatorships.

“When we grow up, we want to be Icelanders!” cried one of the leaders of the organisation during the march on Sunday May 15 before a column of young – and not so young – parents and children, students and workers, the jobless and pensioners. Many Saturdays in Iceland were needed before citizens won the changes they had demanded. Spain’s first Sunday has taken place, and was followed by a Tuesday [May 17]- but there’s still a long way to go.

Protests have now spread to Italy and beyond.

Protest Camps

Green tents are current protest camps. Purple tents are planned protest camps.

My friend Bran who lives in Spain writes …

A Spanish revolution is slowly gaining coverage, both internationally and locally. http://www.ikimap.com/map/2CYF is a map of existing, planned and evicted camps. Politicians and administrations are trying to claim sympathy and similarity to the protests expression, yet no one has good faith in the political class.

‘Revolution’ jumps from Spain to Italy

Courtesy of Google Translate (a choppy one, slightly edited by me) please consider ‘Revolution’ jumps from Spain to Italy and Italy to the rest of the world

Agglutinated protests in Spain by platform Real Democracy Now has called for demonstrations in at least six cities in the country, today and tomorrow at 20.00 .

Concentrations have been summoned by a profile of the social networking site Facebook entitled ‘Italian Revolution. Reale Democrazia Ora ‘, launched yesterday. The cities are Florence are scheduled today at 20.00, and Rome (Plaza of Spain), Milan, Bologna, Padua and Pisa, tomorrow at the same time.

The manifesto makes specific reference to the protests in Madrid, which cites as inspiration and express their solidarity. And the story is repeated all over the world

After Spain and Italy are numerous cities that have emulated the system concentrations.

Berlin joins the struggle for real democracy, support to Spain and joined the protest. “This decision May 20 Berlin Street,” announced their posters.

Paris or Buenos Aires will focus today. Brussels, Birmingham and Bogotá Ahram, tomorrow.

Amsterdam will hold a rally on Saturday 20.

For Spanish speaking readers, here is the original link: http://ecodiario.eleconomista.es/espana/noticias/3081817/05/11/Italia-copia-a-Espana-y-crea-su-Italian-Revolution.html

It is difficult to know what exactly might transpire from these protests, but we certainly have seen some shocking results in Africa and the Mideast already.

Watch Italian and Spanish Government Bonds

Most eyes remain focused on Greece. It is more important, to pay attention to Spain and Italy. Here are the charts I have been watching.

Spain 10-Year Government Bonds

Italy 10-Year Government Bonds

If yields break North of those zones shown in the above charts it will signify a lack of faith in the government bonds of those countries. Spain is huge, but Italy is massive. Italy has as much debt as Germany in an economy nowhere near as big.

I believe it is simply a matter of time before the markets start questioning Spanish government debt. Should Italian debt come into question, so will the very existence of the Euro itself.

Mike “Mish” Shedlock
Global Economic Analysis