The Icelandic deposit insurance

Yesterday I wrote about the veto of the Icelandic president concerning the reimbursement of IceSave depositors. After the Icelandic (and global) banksters privatized the profits, the societies of countries like Iceland are left with the – now socialized – losses. Apparently it hasn’t been enough to cause real riots in the Western societies. The feeble protests so far have been laughable and the creeping death of civil rights in those societies will soon have the last protesters silenced …

However, the fact that Iceland, a rather small economy, is now supposed to act as the lender of last resort for the failure of a clique of banksters is an intriguing prospect in many ways. Perhaps, though, Icelanders don’t consider it intriguing at all – perhaps I as tax-payer in Iceland shouldn’t either. Still, most Icelanders I talked to want to pay back the debts, the opinions just diverge when it comes to the time frame and the other conditions.

The IMF has approved 2.1 billion USD under certain conditions. According to the IMF itself, that deal is not tied to the IceSave issue. Those of us who know the kind of conditions IMF and World Bank have put on economies in exchange for aids in the past will share a certain skepticism with me. Conditions connected to past funds have always been abused to exercise control over those economies in a manner that was usually not beneficial to the economy. The obligations of Iceland are approximately 6 billion USD, which means it cannot at all be covered by the emergency aid approved by the IMF but instead have to be paid off over a longer period of time. And common Icelanders are – understandably – upset about the prospect of having to pay off debts not caused by them, yet most seem to be willing to do so.

But why should the Icelandic people pay those debts? Because the Icelandic deposit insurance (Tryggingarsjóður) couldn’t possibly handle the collapse of all three Icelandic banks? Well, how does that look for other economies then? Even though a lot of secrecy surrounds this kind of institution, the German counterpart to Tryggingarsjóður would most likely not survive the collapse of a single big German bank like the “Deutsche Bank” either. The securities offered by these institutions and the assurances you hear from politicians are nothing but snake oil. The comical aspect becomes more apparent once you realize that you as the tax payer in your country are the one who has to pay for these so-called “guarantees”. There is no more lucrative debtor for a bank than a country with its tax payers as collateral. Banks, by the way, which have helped to privatize profits and socialize losses.

In that light I totally agree that the Icelanders, the people who are supposed to share the burden of paying off debts they haven’t caused, should decide about the issue themselves in a plebiscite.

Unfortunately Iceland is in a somewhat delicate situation. Most of the products sold here have to be imported. Being a “bad” debtor has certain implications in such a scenario. Unlike the US which simply will print more dollars and thereby dilute the own currency (which hurts the US much less than its creditors) or emit more government bonds (and apparently “buy” them using the printed dollars to fake demand, as seemed to be the case for 2009), Iceland’s currency is weak and its collapse wouldn’t have much of an impact on the global economy.

I wonder, though, whether in years to come the Icelanders will be glad their president vetoed the resolution and thereby gave them the opportunity to decide their own future, although right now Ólafur Ragnar Grímsson looks like a spineless politician to many Icelanders …

In general the old principle of divide et impera seems to work out pretty well for those who caused the debacle. Instead of the victims uniting against the actual culprits (politicians, banksters), they will gladly sacrifice each other as scape goats on the altar of the religion of money. To recycle an old quote from Karl Marx and adapt it for our so-called “post-modern times” and globalized world: Citizens of the world, unite!

// Oliver