The fact that the Independence Party received less than 4000 votes over the Left-Greens signals a sea change in how Icelanders view their country and what should be done to take them out of the ruin imposed on them through 18 years of Independence Party and Progressive Alliance (mis)rule. While pre-poll surveys suggested even higher votes for the Left-Greens, this still remains a huge victory for them. Steingrimur Sigfusson, leader of the Left-Greens will probably remain as Finance Minister and his principled opposition to EU and privatization of resources will keep his voice, and party, in the forefront of all major decisions in the days ahead.

Another significant change is the rise of the Citizen’s Movement, a brand new populist based group that arose out of the “pots and pan revolution” which toppled the right wing government this past winter. This new group will now have four seats in Parliament bringing the number of left-populist ministers to 38 out of 63. Iceland will now have one of the most Left-oriented governments of any of the industrialized Western nations. (And special note should be made that 43% percent of the parliament are now women, including the Prime Minister.)

Is this a coup for the Left? Possibly. European Union membership is now the big issue, and unlike most of the Parliament, the Left-Greens are not in favor. Is this a big victory for the people against the moneyed interests who have ruined the world economy? Definitely. Without engaging in too much hyperbole, this next government will take office reflecting a new era of populist revolt against the policies embodied by speculative banking and investment, emblematic of the past 20 years or so in public policy around the world. Don’t let anyone tell you that 300,000+ people can’t signal a shift that might have repercussions for the US . At 1/1000th the population and a far more homogenous society than the US is, it might at first appear so. But looks can be deceiving.

Icelanders took to the streets with grit and determination following revelations that their ruined economy was driven into the ground by self-serving politicians interested more in hobnobbing with celebrities and selling off the country’s resources to the highest bidder than in advancing the people’s best interests. The people decided (in their typically reserved Icelandic manner) that enough is enough and nonviolently toppled the establishment in just a few short months. The people withheld their support, obstructed the governance of the country, and demanded completely new elections. They got all of that and more. A whopping 85.1% of eligible voters voted yesterday, an indication of Scandinavian civic-mindedness, to be sure, but also an indicator of how mobilized the people were.

Whether the new governing coalition can deliver considering the extremely difficult circumstances plaguing the world economy will not be easy to say. Some key differences within the newly certified governing coalition will make solving their problems a bit more complicated than one might at first suspect, given the uniformly positive support the broad Left has received. For example, the Left-Green Movement, unlike the Social Democrats, opposes attempts to join the European Union, which may have siphoned votes from the Independence Party which has also historically opposed the EU. Thus, the Social Democrats, who favor EU integration, will need to proceed cautiously (although the Citizen’s Movement and Progressive Party also favor EU entry). And should EU membership be advanced out of the Parliament, another election will need to be held with a nationwide referendum on EU membership taken.

While a majority in the new Parliament favor EU entry, (even some Independence Party members now support it) the country as a whole is split on this issue but Icelanders aren’t known for impulsively acting on urges (which is partly why the people were so mad at the former government) and will debate this issue carefully. There are pluses and minuses either way. Joining the EU will affect Iceland ’s fishing and immigration policies, among other things, and they are in no position to demand concessions considering their precarious financial condition. But many Icelander’s seeking long-term stability view safety in EU numbers. Either way, major decisions about social service spending, repayment of debt, ensuring unemployment benefits, and restructuring the banking system, while investigating the shenanigans which brought them into this mess in the first place, will be the first tasks ahead. Thus, Jóhanna Sigurdadóttir, the acerbic but viewed as incorruptible Prime Minister, will have her hands full.

For now however, the morning after is quiet as hangovers are nursed and a new era dawns for this republic of Vikings tenaciously clawing their way back into solvency and 21st century relevancy. One can only hope the Left in the US learns something about coalition-building and sustaining mass-based popular movements against government policies that benefit the wealthy few over the many.

What’s true for Iceland holds everywhere, including the developed world, the idea being to enrich finance capitalism through state-sponsored debt bondage and neo-feudal impoverishment. The global economic crisis was no accident. It was long ago hatched, and has been brewing for years, gestating, percolating, then bubbling into the 2000 tech crash, a mere prelude for today’s greater one spreading everywhere like a cancer but hitting the developing world and most indebted nations hardest.

Hudson: “Iceland is under attack — not militarily but financially.”

Like many others, “It owes more than it can pay” and is bankrupt. It was planned that way, and the idea is to strip-mine the nation and its people of their resources, enterprises, assets, land, homes, jobs and futures through perpetual debt bondage. Bankers get enriched. Nations and people, however, are discarded like trash, with the IMF as enforcer, to be reinvigorated with an additional (G 20-pledged) $750 billion, quadrupling its resources to $1 trillion if fulfilled.

Wall Street and Western European bankers planned it and now ordered the government “to sell off the nation’s public domain, its natural resources and public enterprises to pay (its) financial gambling debts.” Also, raise permanent taxes at the worst possible time, then suck the maximum wealth from the country leaving behind an empty hulk and impoverished, desperate population. It’s called dystopia, which Merriam-Webster defines as: “an imaginary place where people lead dehumanized and often fearful lives,” the opposite of utopia under conditions of deprivation, poverty, disease, violence, oppression, and terror, much like in Orwell’s Nineteen Eighty-Four.

Permanent debt bondage “is as deadly as outright military” defeat. Loss of livelihoods and assets leave people vulnerable to sickness, despair, and early deaths, much like what happened to post-Soviet Russia under Washington-imposed “shock therapy:”

• 80% of farmers went bankrupt;
• around 70,000 state factories closed;
• unemployment became epidemic;
• a permanent underclass was created;
• poverty rose from two million in 1989 to 74 million by the mid-1990s, and in half the cases it was desperate;
• alcoholism and drug abuse soared;
• so did HIV/AIDS 20-fold;
• suicides also and violent crime four-fold; and
• the population declined by 700,000 a year; by 2007 it was 10% lower than in 1989 because of sharply reduced life expectancies.

Iceland, the developing world, and the West take note. This cancer is heading everywhere, courtesy of banker-imposed diktats, mainly from America and the UK. They insist Iceland “impoverish its citizens by paying debts in ways (they’d) never follow” even though the government has no way to do it.

No matter. “They are quite willing to take payment in the form of foreclosure on the nation’s natural resources, land and housing, and a mortgage on the next few centuries of its future” – perpetual debt bondage no different than the spoils of war under permanent occupation.

However, in this case, debtors are convinced to pay voluntarily “to put creditor interests above the economy’s prosperity (and) national interest.” Their indebtedness comes at a huge cost: “chronic currency depreciation (and) domestic price inflation for many decades to come.”

Contrast this to how developed countries, like America, handle debt — by inflating (not deflating) their way out to pay it off with cheap (reduced purchasing power) money because inflation erodes its value. It’s simple; by printing money and running budget deficits the way Washington did after Nixon closed the gold window in August 1971, ended the 1944 Bretton Woods Agreement, and no longer let dollars be backed by gold or converted into it in international markets. A new monetary system creates money like confetti, and lets us spend and live beyond our means, then have developing and indebted nations pay the price.

In recent years, dollar weakness and price inflation “wiped out much of the US international debt.” The Iceland model turns “this inflationary solution inside out…in violation of traditional credit practice.” Instead of currency inflation, Iceland “inflate(d) its way into debt, not out of it, (by) indexing (it) to the rate of inflation,” thus guaranteeing “a unique windfall for banks at the expense of wage earners and industrial profits.” The result: destruction of its traditional way of life.

Iceland must “repudiate this debt bomb” to escape. It’s indexed to inflation and “will never lose value.” It’s caught in a destructive whirlpool creating economic shrinkage, falling assets and wages in the face of perpetually burgeoning debt, the same global model needing to be exposed and renounced “now.” Otherwise, economies will be hollowed out, “capital formation will plunge,” people will be impoverished, and many won’t survive.

Hudson’s Background

His expertise comes from “having been an insider to imperial-style plundering…for forty years” – as an economist for Chase Manhattan Bank, Arthur Andersen, and the UN Institute for Training and Development (UNITAR). He’s also taught economics since 1969, heads a Harvard-based economic and financial history group, is a Research Professor at the University of Missouri, and organized the first sovereign-debt fund in 1990 at Scudder, Stevens and Clark.

“All these jobs (except his current professorship) involved analyzing the limited ability of debtor countries to pay — how much could be extracted from them through foreign-currency loans and how much public infrastructure (could) be sold off (through) voluntary virtual foreclosure (under) creditor-dictated rules.”

He advises countries not to borrow in foreign currencies, instead “monetize their own credit for domestic spending and investment.” Iceland broke “the cardinal rule of international finance: Never borrow in a foreign currency for credit” that can freely be created at home. “Governments can inflate their way out of domestic debt,” not the foreign kind.

Post-Soviet economies did it the wrong way, now suffer, and recent riots highlight their problems. “Instead of helping them industrialize and become more efficient,” Western bankers loaded them with debt and exploited them — not for manufacturing and infrastructure development, as loans against existing real estate and infrastructure, to suck as much wealth out quickly.

It produced “bubble economies built on debt-financed real estate and stock market inflation,” illusory wealth “bubbles (that) always burst.” The only sustainable financing of imports is through enough exports for a favorable balance of trade.

De-industrialization destroys economies by shrinking them, the result of plunging property valuations, rental income, and exchange rates. Foreign currency mortgage costs exceed property values producing defaults and losses for lenders.

It’s hitting Sweden, Austria and leading creditor states like America and the UK. Real estate, stock market and employment are declining “in a straight line unprecedented even in the Great Depression.” It’s turned neoliberalism into a nightmare.

“Just as individuals can’t live off a credit card forever, neither can nations. As any classical economist knows, societies that only manufacture debt are unsustainable.” Eventually they collapse into bankruptcy just like a business or household. The old saying applies. Things that can’t go on forever, won’t.

No matter. Predator banks want to prolong the game as long as possible, grab all the wealth they can, force debtor nations to sell state enterprises at distress prices, then get new business by lending to investors who buy them on the cheap. Will it work? Only if targeted countries go along. In the case of Iceland, its very future is at stake.

Sound vs. Imprudent Banking

For centuries, banks created credit responsibly — loaning money for sound investments to debtors able to repay with interest. No one imagined a world like today’s with massive defaults occurring globally. In America, one-third of home mortgages are in “Negative Equity;” that is, “the mortgage exceeds the (property’s) market price pledged as collateral.”

US national debt tripled in one year, from $5-$15 trillion, and according to some economists like John Williams, it’s much higher under GAAP accounting — including unfunded liabilities around $65.5 trillion, an amount exceeding world GDP through FY 2008, meaning America is bankrupt. Williams also puts unemployment at 19.8% by reengineering it to include discouraged and involuntary part-time workers and excluding fictitious birth-death rate ratio inclusions.

Blunt Truths about the “Dismantling of Industrial Capitalism”

Instead of extending credit to construct and grow them, financial oligarchs turned indebted nations into “casinos (through) debt-leveraged gambles,” redistributing wealth upward and creating “debt peonage for most citizens.” Even in America, nearly half the population has no net worth, and the gulf between richest and the rest is unprecedented.

“This is the unfair system that the world’s top creditors would export to Iceland — if they can convince its voters (and leaders) to accept neoliberal debt pyramiding as a way to get rich.” It’s not working throughout post-Soviet states that see it as the road to hell, if public riots are a gauge.

“Better alternatives (are) the only defense” as it’s impossible for “astronomically indebted economies to ‘work their way out of debt.’” Trying will “collapse the currency’s exchange rate,” divert huge amounts of revenue and property to creditors, and produce “a new kind of post-capitalist (unjust, unsustainable) non-production/consumption economy” too gruesome to imagine or tolerate.

Iceland’s financial crisis is the result of lawless predation, an “international (austerity demanding) Ponzi scheme” under rigged market rules imposing public and private “asset stripping” to pay debt. A simple scheme transfers wealth.

Economies and populations are trapped on a “debt treadmill from which there is no escape. (Lenders) pile on credit and let debts grow (through) the ‘magic of compound interest,’ knowing that loans cannot be repaid — except by asset sell-offs.” They’re strip-mined through unending debt service so the parasite keeps feeding on its food source. The idea is to get it all, leaving empty hulks behind, then on to the new victims. It’s “euphemistically dubbed post-industrial wealth creation,” the kind that’s collapsing economies globally and destroying people. Obama is commander-in-chief of the process.

America as Lead Predator

It’s a viciously ugly scheme that’s “trapped other countries into a nightmarish system in which (they’re practically forced) to recycle their excess balance-of-payment dollar inflows back to the US,” mainly as loans to the Treasury.

“When foreign central banks receive dollars for their exports (or asset sales),” their choices are limited. “Congress won’t let them buy important domestic companies or resources,” or get paid with US gold reserves. The alternative is buy Treasuries and mortgage-backed securities like Fannie and Freddie debt.

Icelanders and other nations must remember that America is the world’s largest debtor, and as Adam Smith explained in The Wealth of Nations: “no nation ever repaid its debt,” and he never envisioned one large as America’s. We grow it by issuing paper for real assets and services. Until other countries demand more than confetti, this “Madoff-Ponzi scheme” will persist — for tiny states like Iceland (population 319,000 as of January 2009) until nothing is left to hand over.

Today’s road to riches isn’t through capital investment. It’s by “foreclos(ing) at pennies on the dollar and mak(ing) ‘capital gains’ by flipping property onto (central bank-inflated) world financial markets.” In a word, socializing risks, privatizing profits, preying on the weak, and getting “a free lunch” at public expense.

It’s a zero-sum game. One side’s gain is another’s loss, and when it matches America against Iceland, it’s easy exerting pressure, but no certainty it’ll prevail. As a sovereign state, Iceland can choose. More on that below.

Throughout the process, “financialized wealth is extractive, not productive…because loans, stocks and bonds are claims on wealth,” not the kind produced by making things.

This is Iceland’s dilemma. “Homeowners are paying tribute, not in taxes to (an occupier), in interest to (debt pyramid, international creditor) sponsors of “over-financialization,” aiming to strip-mine the country of everything, the way it’s worked in many developing states. “Yet many Icelanders are heading into this future voluntarily” with little understanding of the trap, propelling them toward debt peonage destitution under the guise of an IMF rescuer – like a spider to a fly.

It shouldn’t happen and won’t if countries refuse to be trapped and extricate themselves in time. Iceland is at a crossroads, still able to avoid what ruined Russia, other post-Soviet states, South Africa, and many other nations misjudging America and the IMF are saviors, not world class predators.

“Back to the Future”: A New Age of Neo-feudal Debt Bondage

Conventional banking works by extending credit in the form of interest-bearing loans and seizing collateral only in cases of default. Central banks were created to finance governments and commercial ones to “expand trade, related infrastructure, mining and shipping,” and develop other forms of business and industry.

More recently, “financial managers persuaded many countries to sell off public enterprises, like their water or energy supplies, mainly to pay debts or cut taxes” for the rich. It’s turned debtor nations into “tollbooth economies in which basic services become a vehicle to extract greater and greater portions of national income and wealth for the benefit of the few.”

It’s the opposite of how classical economists define “free markets.” Today, financial interests control them to extract labor and capital investment-produced surpluses — for themselves under the guise of “economic democracy.” The result “pushed much of the Third World into poverty since the 1960s,” and now the same cancer is heading everywhere.

Financial Warfare As Deadly As by Armies

Today’s financial strategy is “multilateral (with) the IMF (and World Bank) act(ing) as enforcer(s) for global creditors to appropriate the income of real estate, national infrastructure and industry” by masquerading as a helping hand and seducing borrowers to believe it.

Here’s how neo-feudal banking works. It doesn’t create credit for manufacturing. Retained earnings and equity do it. It “create(s) credit primarily against (existing) collateral, and by so doing, “extract(s) money from the economy (and) undercuts industrial growth for “short-term speculative gains.” This hegemony “took thousands of years to achieve,” and it wasn’t easy inducing nations into poverty through “debt pyramiding as good economic strategy.” It’s like prescribing gorging as a way to lose weight or a junk food diet to stay healthy.

Iceland made it worse by “protecting the claims of creditors against debtors,” including most wage-earners. As post-bubble home prices plunged, creditors held their own and even “strengthen(ed) their hand by increasing their take,” thus making a bad situation worse. Its people own a shrinking equity in their homes vis-a-vis bankers having the lion’s share. Its law shifts homeowners to “Negative Equity,” and it works by keeping people in the dark.

But it’s much the same in the US to hide the root cause of today’s crisis — Wall Street/Washington’s engineered housing and debt bubble fraud amounting to financial piracy of the greatest magnitude. In America, Iceland, and elsewhere it’s turned “ownership” societies into “loanship” debt trap ones. Until recently, it was unthinkable to let economies be crippled by interest payments. Now it’s de rigueur through clever manipulation to convince people and nations to go along with their own demise.

For Iceland, its debt burden threatens its national identity and “loss of its future” the way Adam Smith explained — through bankruptcy when it’s too great to repay. “Today, creditors and bondholders care about foreign economies only to the extent that they can charge (enough) interest (to) absorb their entire economic surplus.” Getting it all is today’s credo, and nothing too outlandish is irresponsible. Get in trouble. Socialism comes to the rescue, for bankers, not people or easy targets like Iceland.

Its “ethic is mutual aid and prosperity for all…a highly socialized attitude (yet how tragic that it’s) lead the nation to (buy into) the snake oil (of) debt peonage.” Economic growth never keeps pace with accruing debts that get recycled into greater ones, but end games are the same. “Debts that can’t be paid, won’t be,” while bankers too big to fail get bailed out at the expense of public interests and sound economics. Yet Hudson explains: “Creditor mismanagement is the most important problem that any country should strive to avert.”

Most important is to foster a free and open market of ideas, to extract the best and discard the others. But that’s not how Western societies work, especially banker-run ones. A “free market” for them is “free” of ideas laying bare their snake oil.

“Most societies throughout history provide(d) credit…without oligarchy.” Today it’s the opposite. Predatory finance erased centuries of reform and did it at warp speed. As a result, our freedom is threatened and very close to being lost.

What’s needed is a return to “basics, and a call for transparent statistics,” socially progressive ideas “of a just society free of economic privilege, free of prices in excess of socially necessary costs of production and of rentier income and wealth without effort,” earned “in their sleep,” not through their labor.

It means wealth should be based on “what one creates – not land and natural resources, or monopoly privileges to extract income via control of roads, the right to create money and other natural monopolies.” Reform depends on purging this privilege. “The way to do it is to treat banking like transportation and broadcasting, as a public utility,” not something privatized for “rentiers (to) tax society” for what rightfully belongs to everyone.

In the hands of predators, progressive reforms are impossible as financial giants “preserve their special privileges by law, minimizing taxes on themselves by shifting the burden onto labor and industry.” Financialization:

• “raise(s) the cost of living (and) doing business”;
• frees bankers’ “major customers – mortgage borrowers – from taxation to leave (maximum) surplus (for) interest”;
• collects public sector revenue “by capitalizing it into interest charges” and inflating housing, other real estate, and other business prices;
• “shift(s) taxes onto labor and industry, thereby raising prices and undermining the competitive power of financialized economies.”

This is predation, the very opposite of “classical free market policy.” Keynes concluded his General Theory by calling for “euthanasia of the rentier.” His followers advocate banking as a public utility “to steer debt creation to fund growth in the means of production, not economic overhead by inflating property bubbles.” None of that’s in sight. Maybe someday after the inevitable demise of the current system that will eventually crumble under its own weight.

Lessons for Iceland and Other Nations

Iceland “is under financial attack from outside as well as within — by foreigners supported by a domestic banking class. To succeed (they need) to convince the population that all debt is productive, and that the economy benefits to the extent that its net worth rises (that is, make its asset values appear greater than its debt).”

The fact is that prices don’t fall, “and if they do, debts should (remain), even (at the expense of) negative equity.” Icelanders are being manipulated to believe they have “no alternative but to pay debts that a few insiders (accumulated, ones) that accrue interest when (they’re) unpaid.” In fact, demanded debt amounts exceed what the country can pay, but the strategy is to conceal this as long as possible “to proceed with the foreclosure and voluntary pre-bankruptcy sell-off of national assets to pay” predators.

What’s true for Iceland, holds everywhere Wall Street and the IMF target, and here’s the scheme:

• shrink economies;
• shift wealth and property upwards to a financial oligarchy; and
• price “labor and industry out of world markets as a result of the heavy financial charges built into (the) pricing system.”

Iceland is a “model test case for economic justice.” Hopefully it will “confront reality sooner than later” and not get trapped into perpetual debt bondage by succumbing to global creditor pressure or seduction. What benefits them harms people, and everyone needs to know it. Bankers “aim (for) a return to ‘normalcy,’ defined as new exponential (debt volume) growth” producing more destructive bubbles like the last ones.

Iceland must reject Wall Street’s medicine or perish, and the same holds elsewhere, including in America. Bankers, not nations or people, should take the pain. Hudson asks: “How can Iceland (or Hungary, Latvia, Ukraine, or many other nations) pay its debts without bankrupting itself, (in Iceland’s case) abandoning its social democracy and polarizing its (people) between a tiny creditor oligarchy and” everyone else? They’re threatened by “a new ruling class that will control (their) destiny for the next century” or beyond. It’s their choice to reject it and stay free.

Their “foreign currency loans should be denominated in domestic currency at written-down (and de-indexed) interest rates, or repudiated outright.” The guiding principle should be to annul debts taken out under (destructive and extractive) terms benefitting creditors at the expense of their prey.

They aim to dominate societies — “above all…to maximize the power of debt over labor. The worse the economy does, the stronger” they get. It’s a vicious cycle “recipe for economic suicide (from perpetual) debt peonage.” Iceland can be a test case model against it. It comes down to whether it will back its people or, like America, surrender to financial predators. It’s much the same globally, the result of the greatest ever economic crisis opportunity for plunder. The perpetrators love it. It’s high time they got their comeuppance.

Imagine tiny Iceland taking the lead and fighting back against what another former high-level Wall Street and government insider warns — Catherine Austin Fitts, Assistant Secretary of Housing and Federal Housing Commissioner under GHW Bush and Dillon Read & Co. Managing Director and board member.

In her latest quarterly review, she predicts that “Obama will do more to help bankers achieve centralized control and one world government than any (previous) US politician.” In less than three months in office, he’s shown bankers they can count on him to the tune of trillions of dollars, further open-ended checkbook amounts on request, and global “diplomatic” pressure on targeted nations to surrender. It’s for public rage, tiny Iceland, and other over-indebted nations to demand “no more.” Hopefully enough of them have backbone to do it.

Icelanders, beginning shortly after the government intervened and nationalized the three largest banks upon their collapse, signaled their displeasure with the government and week after week were demanding that the entire cabinet step down, en masse. Well, they now have and it is a victory for democracy lovers everywhere.

Icelanders did it in their own peculiar way, though. While daily reports of violence in the Greek streets dominated foreign news coverage here, I sat in bemused fascination as the travails of one single rock was being debated with the intensity of a grainy JFK assassination video and the moral indignation of a soul-searching nation stunned at its new-found loss of conscience. What a contrast! It seems that in mid-December one police officer had allegedly been scratched by a rock tossed by an angry protestor. Home videos were scrutinized as to whom might have been the attacker and talk show hosts wondered aloud at the moral state of the nation, fearing the direction protests might be turning, and what that might mean for their people who are not known as a violent sort.

While Iceland has had more than its share of a violent past (can anyone say, Vikings?) it seems that the insularity and isolation of the country (and the occasional intervention of its Scandinavian neighbors over the years) has tempered the Icelandic temperament. This has forced typical tension releasing into arenas such as skiing, regular gym workouts and, for the insistent, drunken revelry from Friday to Sunday. But even the latter rarely descends into more than early morning shouting matches as displays of violence are rarely countenanced. In fact, in a recent conversation with Riane Eisler, author of The Chalice and the Blade, she asked this writer to consider if Iceland had in fact, made the remarkable transition from a dominator mode of social relationship to a partnership mode. I will leave that discussion for another time, but the results are stunning. In just over three months, Icelanders have stopped cooperating, withdrawing their support for a coalition government seen as more concerned with holding onto power than working in the people’s legitimate interests. So the people took to the streets. Tentatively, of course, and with an Icelanders typical reserve, holding protests in front of the Parliament building on Saturdays, promptly and peacefully at 3pm. But the people came together.

While Athens burned into a maelstrom of ungovernable chaos, Icelanders, in roughly the same time period, politely listened to long speeches and, as the weeks progressed, increased their venting with the occasional egg toss and curse word. (One newly coined expression of their frustrated rage was “Fokking fokk!” laughable perhaps at first listen, but as near a violent expression as I’ve heard hear in nearly seven years). A couple of times small bonfires were lit and, as reported later, appeared to be evidence of violence against the Parliament. No such violence occurred, though. And as the recent tensions came to a head and the frustration boiled over even more, many protesters took to wearing orange ribbons signifying their “legitimate” protester status, as opposed to the occasional drunken lout eager to fight or create mayhem at will, something most Icelanders, pro or against the government loathe. Still the protests continued onward and Icelanders, oblivious to the cold and rain soldiered on bravely until, last week, on January 20, as the Parliament resumed meeting, the protests culminated in between 7-8000 people gathering (the US equivalent of 7-8 million). (This was the second time such a large gathering had happened in the course of this crisis.) Apparently, the die was cast: within a few days, the Business Minister resigned and the political blogging hit a fevered pitch, letting the politicians know their time was up. It has now precipitated the collapse of the government and the frenzied assembling of a caretaker government to lead until elections are held in May. Where this will go in the next few months is uncertain, (the Left-Green Alliance is certainly to be a major player in the new government) but the Icelandic example provides powerful instruction that, when a people reject violence and take up a struggle together, they can still actually win.

Yesterday, (Nov. 22) an estimated 7-8000 people (the US equivalent to several million) gathered in what is becoming a weekly mass protest in front of the Althingi, or Parliament. As well, angry citizens stormed the police building in downtown Reykjavik to force the release of one young man held for raising a supermarket chain flag atop the Parliament building. Eggs now regularly adorn the Parliament’s windows and doorways, statues are defaced, and the demands for the government to step down are becoming increasingly forceful. And near-violent as well. Perhaps the best received line in all the speeches yesterday was passionately delivered by Katrín Oddsdottir who said, at Saturday’s gathering said, “If they don’t let us vote, we will find another way of voting-we will carry them out…” In a country this size, this is not a threat to be taken lightly.

The calls for new elections are taking an edgy fervor, with a normally quiet citizenry emboldened each week despite governmental news conferences rejecting early elections, and thin pledges to trim Parliamentarian salaries. The dominant party of the past 60 years, The Independence Party (conservative, neo-liberal) has its reputation in complete tatters. (A recent study projects that, were an election were held today, they would receive a paltry 24%, losing eight representatives in Parliament. In contrast, an election held today would propel the Left-Green Movement into power with 19 members, up from only 9 now. No wonder they don’t want to call early elections.)

The Independence Party’s former leader (and ex-Prime Minister for 12 years) David Oddsson, had been appointed head of the Central Bank of Iceland in 2007 in a sweetheart deal that now has him and a few other politicians (like current Prime Minister, Geir Haarde) facing physical threats in a decidedly uncharacteristic Icelandic display of anger. The largest opposition party, the Social Democratic Alliance (moderately socialist) is fairing a little better, though their once-vaunted standard-bearer Ingibjörg Solrun Gisladottir sits in the coalition partnership with the Independence Party. A mood of barely subdued volcanic tension is felt everywhere and Iceland ’s politicians are in serious trouble.

The one notable exception, Steingrimur J. Sigfusson, the eloquent Left-Green Movement leader, is rising dramatically in the polls. His calls for a new election are becoming so forceful that, despite a constant barrage of anti-new election PR, the ruling coalition is facing almost no support and losing rapidly what little it retains, pushing them towards that very real possibility.

Iceland , sitting literally smack in the middle of two tectonic plates, (ironically the European and North American) is now facing earth-shaking political tremors which may soon herald a completely new configuration in Icelandic politics. Let us hope the political classes on both sides of this divide also take the hint and act rapidly in their countries before they too face similar populist dissatisfaction. For if they don’t, this small North Atlantic island might spawn a tsunami that washes onto both American and European shores and cleans out the political detritus there. One can only hope…

anywhere you go, it’s the same cry
money worries

– The Maytones

When I arrived in Iceland nearly 7 years ago, I saw two distinct faces of the country. On almost every large hilltop stretching from Reykjavík to the airport were a half dozen cranes, blighting the otherwise gorgeous scenery in a perverse paean to over development which almost no one at the time thought necessary but everyone put up with. It seemed to demonstrate some Icelandic version of “Damn the torpedoes—Full steam ahead!” This might explain, among other things, the revival of whaling (a marginal enterprise at best), granting Bobby Fischer citizenship, and selecting in-your-face comedienne Agusta Erlendsdottir as their representative to Eurovision in 2006. Each of those actions (and others) drew condemnation and quizzical stares from their neighbors. However, Icelanders don’t care much for what outsiders think and don’t like being told what to do—even if it’s in their own best interests. So now we watch as the entire economy collapses and, in typical Icelandic fashion, barely a whisper is heard about how their version of neo-liberal IMF Republicans have driven them into uncharacteristic submission before the financiers of the world. It’s a sad time to be in Iceland, and my guess is things will only get worse.

Usually the only time Americans hear about Iceland is when some intrepid traveler returns to regale us with tales of lunar-like landscapes, stunningly fresh air and endless miles of unspoilt beautiful expanses. Now Iceland, making headlines on the Wall St. Journal, the New York Times, CNN, BBC, and others, returns to our attention as what the British press are calling a “test case” of failed capitalism. Pay attention America. In the past week, all three of Iceland’s biggest banks have essentially collapsed and been taken over by the government. Stock trading has been suspended, and a war of words is happening between Iceland’s banking czars and the Brits over the possibility that Iceland will not secure the money many Brits placed in another Icelandic bank, Icesave. By this time next month, it is betting odds that the Icelandic Kronur will be an historical relic, the IMF will have bailed them out, and the adoption of the Euro is near inevitable. Not to mention all those typical bailout conditions the IMF levels to the Third World like stringent “austerity measures” and other cheerful sounding destructors of formerly independent people around the world.

It is now becoming clear that Iceland (a country so fiercely proud of its identity that the novelist Halldor Laxness, 1955 recipient of the Nobel Prize in literature won for was appropriately titled, Independent People) is no more independent in almost any but the most perfunctory ways. This is because the criminal class who privatized the banking system, creating for the first time since the Middle Ages a class of ultra-rich who could afford to buy soccer clubs in England, and get Elton John to sing at their birthday parties, are now begging Russia to lend them 4 billion Euros (5.8 billion dollars) to help them weather a crisis they caused. On top of that, it is near certain that the IMF will step in like they have done in many countries and extract further concessions sure to be painful to that delicate ego which clings to a proud independent streak.

In other countries, a “throw the bums out!” mentality would be heard and swiftly acted upon. So far, nothing of the sort is playing out here. That might be because since gaining their independence from Denmark in 1944, the Independence Party, which has dominated the political scene since then, cunningly plays right into the myth of Icelanders as an independent people that Laxness so beautifully wrote about almost 60 years ago. But the nostalgic retention of such an image is dangerous. Especially when reality bites. Holding on to this image, by constantly allowing the Independent Party to rule, even in coalition with other parties, only insures that so long as it’s done under the guise of maintaining this myth of independence, Icelanders will close their eyes to the apparent thievery that goes on under their noses. They would do well to try something new. Quickly.