Iceland teeters on the brink of bankruptcy

[Die Neue Zeit]

http://news.yahoo.com/s/ap/20081008/...28StUBRFxvaA8F

This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.

Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy — from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes — their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.

"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.

A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

[Saorsa]

A comrade of mine had a good reply to this;

[FONT=Arial][FONT=Arial]One of the things this shows is that you can’t have a national economy that is built on the finance sector. You actually need a sector that produces real goods.[/FONT][/FONT]
[FONT=Arial][FONT=Arial] [/FONT][/FONT]
[FONT=Arial][FONT=Arial]Adam Smith rightly noted that the wealth of nations is contained essentially in commodities – in his day that meant material goods produced for sale on the market.[/FONT][/FONT]
[FONT=Arial][FONT=Arial] [/FONT][/FONT]
[FONT=Arial][FONT=Arial]Today the decrepit state of capitalism as a global system means that relatively low profitability in the real economy sends capital into the artificial economy, massively ratcheting up paper values (arbitrary prices/numbers on various kinds of pieces of paper and references on computer databases) and the word ‘commodity’ in bourgeois economic parlance has been narrowed down to describe basically just raw materials and agricultural products.[/FONT][/FONT]
[FONT=Arial][FONT=Arial] [/FONT][/FONT]
[FONT=Arial][FONT=Arial]The artificial economy also appeals to the capitalists who, as Marx noted back in the 1860s, have the fantasy that money makes money and would love a circuit of M – M* (where M* equals more money) without having to go through the whole convoluted process of buying plant, machinery, raw materials, labour-power, setting up and organising a production process and then having to market and sell all the commodities produced by that process, all the while maintaining stable socio-political conditions sufficient for that convoluted production process to be worked through.[/FONT][/FONT]
[FONT=Arial][FONT=Arial] [/FONT][/FONT]
[FONT=Arial][FONT=Arial]This capitalist fantasy continually comes up against reality.[/FONT][/FONT]

[al8]

The Chairman of the Central Bank just announced in an interview this evening that they aim to nationalize the Landsbanki on a national level, but would allow it's foreign assets along with its deposits to be liqidized by claimants. The State would not burden itself nor the taxpayers by paying or vouching for the failed commitments of "economic arsonists". The state would inject its own new deposit of icelandic credit into the newly nationalized bank.
The same procedure would be applied to any other bank that would go bust.

There are several other banks; Kauþing, Glitnir and SPRON. The State has announced that it would buy a 75% part of Glitnir. The transaction has not happened yet, there is a meeting pending this Saturday (if the bank hasn't gone bust by then, that is (if so the state will nationalize the bank in the same fasion). The others are having troubles, but it's now but to wait and see.

The funny thing is the Chairman of the Central Bank, David Oddson, former leader of the Conservative ruling party was the one that lead the privatisation of the national bank. The free market stuff hit the fan and everybody is smelling it. Now he claims he had forwarned of this situation for a year whilst being a Chairman of the Central Bank, but that nobody listened. He still defends the action taken (towards privatisation, and privatisation of the state bank in particular). He says it has "opened the country up and brought great freedom" and that he can't be blamed when "somewhere down the road someone [bankers, CEOs] abuses that freedom".

[Sendo]

what's gonna happen to the cayman islands i wonder

[al8]

The Chairman of the Central Bank just announced in an interview this evening that they aim to nationalize the Landsbanki on a national level, but would allow it's foreign assets along with its deposits to be liqidized by claimants.

This could for example that meen people in Britain and other places would loose most of their savings. Only geting back 5-15% of what they had previously owned in the banks after the liquidation prosedures.

[ashaman1324]

im sure this will fly real well with the EU. i thought iceland was taking preventive measures against this though?

[al8]

Yes they are. They have given the Financial Supervisory Authority great powers to interfere in the financial system. But they are really doing no different then what the US dos and has done do banks gone bankrupt. They are not going to pay for a scandal just as a US did with it's bankrupt bank (wich I can't for the life of me remember at the moment what was called).

[al8]

People are very angry in Iceland at the moment, and resentful. More and more of the bankers chicanary is revealing itself. Many cannot access their funds. The most strange thing is how seething peoples conciousness has become.

The State stresses class colaborationism and that "We are all in this together".

[Comrade Stern]

where else could something like this potentially happen next?

[Labor Shall Rule]

where else could something like this potentially happen next?

Russia's equities are tied to U.S. credit (by roughly 70%), so this money that is completely divorced from value, that is being thrown onto the laps of institution [fill in the bank that traded mortgages to other firms who hoped, in turn, that people would default on it] is pulling out of their fragile financial markets. Their stock market is trading at a level lower than ever before seen in the last five years.

[Comrade Wolfie's Very Nearly Banned Adventures]

Iceland is being sued by the UK for lost capital lol

[Raúl Duke]

wow, everything seems to be like a world-wide global economic slowdown...
Will it or will it not end up in a depression for many countries?

[Sendo]

where else could something like this potentially happen next?

Korea (its stock being KOSPI) is so bad it's showing up in Western media video clips. Things are bad here. They depend entirely on exporting crap to consumerist Americans. The currency is approaching the 1998 levels.

Prices are okay....right now, but soon anything that's a local vegetable will jump in price as will gas. It's just gonna take a little while, but reading news on it, the Korean economy is doomed. If the USA sneezes the Asian Tigers get pneumonia and strep throat and asthma.

You can be sure that the expat community will rant that foreign investment drops because Koreans are filthy people, though. Go to eslcafe.com if you ever want to hear the most idiotic perspectives on politics. Over the past year foreign investment has been dropping. Like good little high school history graduates they think foreign investment is a reward from benevolent masters of the world and the fact that the economy has been sputtering should come as no surprise given the way Koreans behave. I wish I were making this up.

[al8]

The British authorities have taken over another icelandic bank based in Britain even though it was not bankrupt and deposits backed up british funds in stead of icelandic funds like as with the Icesave bank. Also during the night the Icelandic Financial Supervisiory Authority seized the domestic branch of Kaupthing, in the same manner as it did Landsbanki.

This is an incredible deveolopment. A financial speculant "capitalism was near collapse". And I see people in blogg comments say; "So Marx was correct all along".

What has happened that peopele with 80 million icelandic crowns (ISK) are loosing 78 m.ISK because only deposits by the amount 2 m.ISK. Companies have difficulty getting forreign products because the suppliers won't take ISK, only Euros or some other currency. And there is shortage of such. So that means that Icelanders will be eating near entirely domestic food-product. Luckely the productive capacity of the farming industry will be able to feed the nation, as long as oil, pestisides and fertilizers are available.

[al8]

The British Authorities made the seizure of Kaupthing by reference to the laws against terrorism. Some say this just goes to show how broad the terror law is. Both in Iceland and in Britain. My opinion is that this might just be the first time the terror law is appropriatly used, that is to say against fat-cat institutions.

The Icelandic Authorities are trying to put things into diplomatic channels between the athorities of the UK, Netherlands and Finnland. And they say they will honor state obligations as decribed by EU regulations.

[Schrödinger's Cat]

[FONT=Arial]If something like this were to happen in Cuba, the press would be quick to prove that it's a fault with the system. Heh. [/FONT]

[S&Y]

I was looking up for a subjective factor in Iceland in order to play a role in a potential revolution.

After all this economic crisis creates material conditions for revolution there. And I found out something interesting I wanted to share with the board.

They seem to be unusually left-wing and they receive 15%. Now with the crisis the more revolutionary elements might have more influence in the party.

I am not sure but I smell something in the air.

It is not a familiar smell, it is the smell of revolution!

The Left-Green Movement (Vinstrihreyfingin - grænt framboð) is a left-wing, socialist, environmentalist, feminist and eco-socialist political party in Iceland.
It was founded in 1999 by a few members of Alþingi that did not approve of the planned merger of the left parties in Iceland that resulted in the founding of the Alliance (Samfylkingin). The Left-Green Movement focuses on socialistic values, feminism and environmentalism, as well as increased democracy and direct involvement of the people in the administration of the country. The party opposes Iceland's involvement in NATO and also the U.S. invasion and occupation of Iraq and Afghanistan. The party rejects membership of the EU and supports the Palestinian cause in the Middle East. It supports the mutual adaptation and integration of immigrants and Icelandic society is necessary.
The Left-Green Movement is a member of the Nordic Green Left Alliance.
The Left-Green Movement has about 3,000 members. The party chairman is Steingrímur J. Sigfússon, MP. The vice chairman is Katrín Jakobsdóttir, MP. The secretary-general of the party is Drífa Snædal.
In the 1999 parliamentary elections the Left-Green Movement took 9.1% of the vote and six seats in the Alþingi. It had five members in the 63-seat Icelandic parliament after the 2003 elections where it polled 8.8% of the vote. After the 2007 elections the party has 9 seats in parliament, having received 14,3% of the vote. The Left-Green Movement is in fact very special of it's kind. It's very unusual for a extreme green party to receive up to 15% in an election and up to 20% in polls.

[Schrödinger's Cat]

[FONT=Arial]I think the "pink tide" will grow, yes. The question is - can this pink tide become red? [/FONT]

[al8]

The Vinstrihreyfingin - grænt framboð have time and again shown themselves to be just another social-democratic bourgeois parlimentary political party. It started out with some socialist (with high hopes) but they are not many now and make up no significant part of the party. The youth org of the party, Ung-Vinstir græn is slightly more radical, though not that much.

I don't think any of the bourgeois parties are going to bring us closer to a revolution, rather further away from it. But Vinstri have have had no significant part in the financial debacle so that might bring them some voter credibility.

The current situation has certainly given alot of people a wakeup call. People are drawing different conlusions. Some blame only the bankers, goverment officials domestic and foreign. Fewer seem to take the conclusion so far as to say; "it differ little to fuss about individual leeves when the root is rotten." That is, blame capitalism.

The bourgeois media isn't exactly pushing that perspective, rather giving people scapegoats, individual leafs to fuss over. Such as foreign nations/authorities for not accepting credit-swap lines, individual or foreign politicians for bad hadling of the situation and so forth.

There have been small protests the last couple of days where commies have had a presence. Here is a small video from Reuters that shows the first protest that went on infront of the Central Bank of Iceland. You can even hear the Indernationale being sung.

I don't think the things are severe enough that people would make revolution. If the state hadn't steped in to save the system there well could have been a process that would maybe have lead to that. But what has happened over the last days is certainly making people more receptive to radical sollutions.

[piet11111]

If the state hadn't steped in to save the system there well could have been a process that would maybe have lead to that.

save the system ?

the crisis has only begun and iceland is now heavily dependent on foreign money to keep afloat.
those loans will have to be repaid with interest so they did not stop anything they only managed to delay and by doing so they made things worse.

delay and make worse is all that governments and bankers managed to do now that they are on damage control but nobody is fooled just look at the stock market reports on the news.

country's around the world are paving the way for serious inflation by their reckless borrowing and when that hits the masses will feel the pain of rising prices and wages that can not be raised to "keep the economy going"
that is when the shit will really hit the fan.