So, it is pretty hard to predict how any event, let alone a whole decade, will be remembered. Because we do not know what the future holds, or what academic fads will reign among future historians, it is exceedingly difficult to say with any certainty how future historians will judge this first decade of the 21st century. Still, even if we lack the necessary hindsight of history, we can make some pretty good educated guesses.

A decade of progress

The first decade of the 21st century in Iceland will most certainly be remembered as a decade of progress and achievement by those future historians who will emphasize social and cultural history. Important milestones were met in the history of human rights and equality, most recently with the 2010 law, which gives gay couples the right to marry. Another milestone was reached in 2009 when Jóhanna Sigurðardóttir became the first woman to serve as Prime Minister of Iceland and the first openly gay person to serve as a PM anywhere. An important step in world history.

Also, Iceland became a truly multicultural society as large numbers of foreigners, primarily Eastern Europeans, migrated to Iceland in search of work. And despite the occasional flaring up of xenophobia, Icelandic society welcomed these immigrants. By the end of the decade, Reykjavík authorities had even acknowledged that people from other cultures had the right to construct their own houses of worship, finally granting the nation’s small Muslim community the right to build their own mosque.

The decade was also important in Icelandic cultural history. The arts flourished and Icelandic musicians enjoyed considerable success both in Europe and America.

All in all, Iceland in 2010 is far more cosmopolitan than it was in 2000.

A decade of failure

However important these developments are, I would argue that none of them is as important as the colossal, utter and inexcusable failure of the Icelandic economic miracle, which certainly is the defining event of the decade. The neoliberal experiment of creating prosperity by slashing taxes and regulations in order to turn Iceland into some sort of business friendly tax haven and global financial centre finally ended with the complete collapse of 2008.

The reason the public went along with this experiment in the first place was that Icelanders had been led to believe they lived in a country characterised by fair play, equality and—above all—honesty. Iceland was ranked as the least corrupt society in the world and Icelanders believed they were governed by honest politicians and that their businessmen were equally hardworking and honest.

The collapse and its aftermath showed Icelanders that this had been a mirage. The bankers, hailed as financial wunderkinder were actually looters. The politicians incompetent morons. Like the hapless Minister of Economic Affairs, caught like a deer in the headlights, without a clue as to what to do when they were faced with tough choices. Others, bursting with arrogance and delusion, like former Minister for Foreign Affairs Ingibjörg Sólrún Gísladóttir, declaring that those who dared protest the inaction and incompetence of politicians were “not the nation.” Davíð Oddsson refusing to step down from the chair of the Central Bank. The managers of Kaupthing contemptuously declaring that they had absolutely nothing to apologise for.

A decade of squandered trust

Trust is obviously important for all societies. But too much trust, as well as undeserved trust, is dangerous, and I would argue that one of the greatest weaknesses of Icelandic society at the beginning of the decade was excess trust: excess trust in politicians, business leaders and the market ideology. One of the main reasons for the protests that began in the fall of 2008 is the public’s realisation that the elites, both political and economic, had betrayed the trust that they had enjoyed.

In fact, this appears to be part of a global pattern: everywhere, trust in politicians and business leaders has collapsed. Everywhere the reason is the same. The economic failure and financial collapse, caused by reckless financiers and complacent politicians, are not the primary reason—the real reason is that people feel they were betrayed by their “elites.”

During the bubble, people tolerated growing income inequality because they were promised that the wealth would trickle down. It turned out the public was not allowed to share in the wealth, only the debts, because when the crash came, the public was forced to shoulder the cost of bailing out the speculators. To make matters worse, the left wing government, which promised to protect the homes and families, has been unable to come up with a comprehensive plan to help the public, and no concrete steps have been taken to increase social justice.

Lessons learned

This is not all bad, of course. People have learned the hard way that it is impossible to build permanent prosperity for an entire society on speculation, market manipulation and corporate raiding.

Icelanders have also learned important modesty. But at a steep price. Historically, Icelanders have been plagued by a certain mix of insecurity and self-importance. During the boom years the insecurity was replaced by arrogance, creating a poisonous certainty and delusions of grandeur that fuelled the Icelandic financial bubble. As the bubble burst, people realised that Iceland was not the centre of the universe. To paraphrase the Borat-esque mangled Icelandic of the first lady: Iceland is certainly not “the most big country in the world” (stórasta land í heimi).

Finally, Icelanders have also learned that protest can be effective. It is not so long ago, that it was a commonly held belief that Icelanders were somehow genetically incapable of political protest. Groups like Saving Iceland were vilified and political activists were considered suspect. The financial collapse rekindled a spirit of political engagement that had all but died out during the bubble.

One can hope that this newfound political engagement and activism will lead to more democratic politics and more responsive politicians.

Mass protests were also held in Greece, Portugal, Spain, Ireland, Germany, Italy, France, Slovenia, Lithuania, Latvia, Czech Republic, Cyprus, Serbia, Romania, Poland, and the U.S., according to reports from several sources. Folks around the world reject corrupt banking practices and bailouts, while social services are cut and tens of millions have been forced into joblessness and homelessness.

Dori Sigurdsson, an Icelandic blogger, reports that when Parliament returned from recess on October 1st, they were met by a loud, angry crowd who tossed eggs, bread, dairy products and keys at them. People slept outside the Parliament building the night before its return session. He’s posted videos and several images.

Dori notes, “because of the lack of help from the Goverment for the public, many are now losing their houses and cars.” In a nation of only 317,000, 12 percent (or 40,000) have lost — or are about to lose — their homes, he says Icelanders condemn the injustice of large companies and their CEOs having had their debts forgiven by government, while theirs are not.

Three other officials were charged with “misconduct in the lead up to, during and following the banking crisis,” reports Ice News. Parliament voted to prosecute only Haarde for negligence, under a 100-year-old law that has never before been used.

Icelanders are also angry that only the former PM is being charged. One commenter on the Ice News article noted, “Is this not a total betrayal of the people?” And criminal, to reasonable minds.

Eggs hit Prime Minister, Jóhanna Sigurðardóttir, who rode into power as Iceland’s most beloved political leader with a 75% approval rating. She was installed in January 2009 after a coalition of Social Democrats and Left-Greens formed to replace the Independence Party-led coalition government, headed by Haarde, which was terminated. Should other nations terminate their corrupt governments?

The Guardian notes widespread protest across Europe “amid growing fury at austerity measures being imposed… Disruption in more than a dozen countries this week included a national strike in Spain and a cement truck driven into the Irish parliament’s gates.” Press TV also reported on protests planned in several nations last week.

Even in the US, thousands recently protested in Washington, D.C. for jobs instead of wars. ANSWER Coalition’s Brian Becker told reporters that the US spends a billion dollars every two days for its military invasions. That’s much lower than the trillion dollars a year that Robert Higgs of the Independent Institute calculates. We do know that Congress spends 58 percent of its discretionary budget on the military.

Many economists note that unemployment in the US is two to three times higher than what the Labor Department reports. In July, economists put the number at 28 percent, compared to the 9.5 percent rate reported by the feds. For September, the Christian Science Monitor showed unemployment at 16.7 percent, while the feds reported 9.6 percent.

In the US where 95% of the public rejected both Wall Street bailouts (under Bush and under Obama), we learned that banksters then rewarded themselves with million dollar bonuses. The boldness of their depravity is sure to have its rebound effect. Is it time to terminate this government too?

The Guardian also reported that a “UN agency has warned of growing social unrest because of a long ‘labour market recession’ that could last until 2015.” 2015!

Thank goodness mortgage squatters are growing in number in the US. This is even before it was discovered that “foreclosure mills” fabricated documents to seize peoples’ homes. Some of those mills do not even hold legal title, Ellen Brown reports.

In Iceland, the Guardian noted, “Birgitta Jónsdóttir, one of three MPs to join the protesters, said: ‘There is a realisation that the IMF is going to wipe out our middle classes.’” That’s true of every nation sucked into the greed of banksters, the US included.

Protesters are out again right now, Monday night, Dori told me (6 pm Eastern, 10 pm Iceland time).

“The protest is still on, and it is peaceful – but with lots of noise that can be heard in the Parliament building.”

The financial sector has sometimes been accused of shrinking the money supply intentionally, in order to increase the demand for its own products. Bankers are in the debt business, and if governments are allowed to create enough money to keep themselves and their constituents out of debt, lenders will be out of business. The central banks charged with maintaining the banking business therefore insist on a “stable currency” at all costs, even if it means slashing services, laying off workers, and soaring debt and interest burdens. For the financial business to continue to boom, governments must not be allowed to create money themselves, either by printing it outright or by borrowing it into existence from their own government-owned banks.

Today this financial goal has largely been achieved. In most countries, 95% or more of the money supply is created by banks as loans (or “credit”). The small portion issued by the government is usually created just to replace lost or worn out bills or coins, not to fund new government programs. Early in the twentieth century, about 30% of the British currency was issued by the government as pounds sterling or coins, versus only about 3% today. In the U.S., only coins are now issued by the government. Dollar bills (Federal Reserve Notes) are issued by the Federal Reserve, which is privately owned by a consortium of banks.

Banks advance the principal but not the interest necessary to pay off their loans; and since bank loans are now virtually the only source of new money in the economy, the interest can only come from additional debt. For the banks, that means business continues to boom; while for the rest of the economy, it means cutbacks, belt-tightening and austerity. Since more must always be paid back than was advanced as credit, however, the system is inherently unstable. When the debt bubble becomes too large to be sustained, a recession or depression is precipitated, wiping out a major portion of the debt and allowing the whole process to begin again. This is called the “business cycle,” and it causes markets to vacillate wildly, allowing the monied interests that triggered the cycle to pick up real estate and other assets very cheaply on the down-swing.

The financial sector, which controls the money supply and can easily capture the media, cajoles the populace into compliance by selling its agenda as a “balanced budget,” “fiscal responsibility,” and saving future generations from a massive debt burden by suffering austerity measures now. Bill Mitchell, Professor of Economics at the University of New Castle in Australia, calls this “deficit terrorism.” Bank-created debt becomes more important than schools, medical care or infrastructure. Rather than “providing for the general welfare,” the purpose of government becomes to maintain the value of the investments of the government’s creditors.

England Dons the Hair Shirt

England’s new coalition government has just bought into this agenda, imposing on itself the sort of fiscal austerity that the International Monetary Fund (IMF) has long imposed on Third World countries, and has more recently imposed on European countries, including Latvia, Iceland, Ireland and Greece. Where those countries were forced into compliance by their creditors, however, England has tightened the screws voluntarily, having succumbed to the argument that it must pay down its debts to maintain the market for its bonds.

Deficit hawks point ominously to Greece, which has been virtually squeezed out of the private bond market because nobody wants its bonds. Greece has been forced to borrow from the IMF and the European Monetary Union (EMU), which have imposed draconian austerity measures as conditions for the loans. Like a Third World country owing money in a foreign currency, Greece cannot print Euros or borrow them from its own central bank, since those alternatives are forbidden under EMU rules. In a desperate attempt to save the Euro, the European Central Bank recently bent the rules by buying Greek bonds on the secondary market rather than lending to the Greek government directly, but the ECB has said it would “sterilize” these purchases by withdrawing an equivalent amount of liquidity from the market, making the deal a wash. (More on that below.)

Greece is stuck in the debt trap, but the UK is not a member of the EMU. Although it belongs to the European Union, it still trades in its own national currency, which it has the power to issue directly or to borrow from its own central bank. Like all central banks, the Bank of England is a “lender of last resort,” which means it can create money on its books without borrowing first. The government owns the Bank of England, so loans from the bank to the government would effectively be interest-free; and as long as the Bank of England is available to buy the bonds that don’t get sold on the private market, there need be no fear of a collapse of the value of the UK’s bonds.

The “deficit terrorists,” however, will have none of this obvious solution, ostensibly because of the fear of “hyperinflation.” A June 9 guest post by “Cameroni” on Rick Ackerman’s financial website takes this position. Titled “Britain Becomes the First to Choose Deflation,” it begins:

David Cameron’s new Government in England announced Tuesday that it will introduce austerity measures to begin paying down the estimated one trillion (U.S. value) in debts held by the British Government…. [T]hat being said, we have just received the signal to an end to global stimulus measures — one that puts a nail in the coffin of the debate on whether or not Britain would ‘print’ her way out of the debt crisis…. This is actually a celebratory moment although it will not feel like it for most…. Debts will have to be paid…. [S]tandards of living will decline … [but] it is a better future than what a hyperinflation would bring us all.

Hyperinflation or Deflation?

The dreaded threat of hyperinflation is invariably trotted out to defeat proposals to solve the budget crises of governments by simply issuing the necessary funds, whether as debt (bonds) or as currency. What the deficit terrorists generally fail to mention is that before an economy can be threatened with hyperinflation, it has to pass through simple inflation; and governments everywhere have failed to get to that stage today, although trying mightily. Cameroni observes:

[G]overnments all over the globe have already tried stimulating their way out of the recent credit crisis and recession to little avail. They have attempted fruitlessly to generate even mild inflation despite huge stimulus efforts and pointless spending.

In fact, the money supply has been shrinking at an alarming rate. In a May 26 article in The Financial Times titled “US Money Supply Plunges at 1930s Pace as Obama Eyes Fresh Stimulus,” Ambrose Evans-Pritchard writes:

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of institutional money market funds fell at a 37pc rate, the sharpest drop ever.

‘It’s frightening,’ said Professor Tim Congdon from International Monetary Research. ‘The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,’ he said.

Too much money can hardly have been pumped into an economy in which the money supply is shrinking. But Cameroni concludes that since the stimulus efforts have failed to put needed money back into the money supply, the stimulus program should be abandoned in favor of its diametrical opposite — belt-tightening austerity. He admits that the result will be devastating:

[I]t will mean a long, slow and deliberate winding down until solvency is within reach. It will mean cities, states and counties will go bankrupt and not be rescued. And it will be painful. Public spending will be cut. Consumption could decline precipitously. Unemployment numbers may skyrocket and bankruptcies will stun readers of daily blogs like this one. It will put the brakes on growth around the world…. The Dow will crash and there will be ripple effects across the European union and eventually the globe. … Aid programs to the Third world will be gutted, and I cannot yet imagine the consequences that will bring to the poorest people on earth.

But it will be “worth it,” says Cameroni, because it beats the inevitable hyperinflationary alternative, which “is just too distressing to consider.”

Hyperinflation, however, is a bogus threat, and before we reject the stimulus idea, we might ask why these programs have failed. Perhaps because they have been stimulating the wrong sector of the economy, the non-producing financial middlemen who precipitated the crisis in the first place. Governments have tried to “reflate” their flagging economies by throwing budget-crippling sums at the banks, but the banks have not deigned to pass those funds on to businesses and consumers as loans. Instead, they have used the cheap funds to speculate, buy up smaller banks, or buy safe government bonds, collecting a tidy interest from the very taxpayers who provided them with this cheap bailout money. Indeed, banks are required by their business models to pursue those profits over risky loans. Like all private corporations, they are there not to serve the public interest but to make money for their shareholders.

Seeking Solutions

The alternative to throwing massive amounts of money at the banks is not to further starve and punish businesses and individuals but to feed some stimulus to them directly, with public projects that provide needed services while creating jobs. There are many successful precedents for this approach, including the public works programs of England, Canada, Australia and New Zealand in the 1930s, 1940s and 1950s, which were funded with government-issued money either borrowed from their central banks or printed directly. The Bank of England was nationalized in 1946 by a strong Labor government that funded the National Health Service, a national railway service, and many other cost-effective public programs that served the economy well for decades afterwards.

In Australia during the current crisis, a stimulus package in which a cash handout was given directly to the people has worked temporarily, with no negative growth (recession) for two quarters, and unemployment held at around 5%. The government, however, borrowed the extra money privately rather than issuing it publicly, out of a misguided fear of hyperinflation. Better would have been to give interest-free credit through its own government-owned central bank to individuals and businesses agreeing to invest the money productively.

The Chinese have done better, expanding their economy at over 9% throughout the crisis by creating extra money that was mainly invested in public infrastructure.

The EMU countries are trapped in a deadly pyramid scheme, because they have abandoned their sovereign currencies for a Euro controlled by the ECB. Their deficits can only be funded with more debt, which is interest-bearing, so more must always be paid back than was borrowed. The ECB could provide some relief by engaging in “quantitative easing” (creating new Euros), but it has insisted it would do so only with “sterilization” – taking as much money out of the system as it puts back in. The EMU model is mathematically unsustainable and doomed to fail unless it is modified in some way, either by returning economic sovereignty to its member countries, or by consolidating them into one country with one government.

A third possibility, suggested by Professor Randall Wray and Jan Kregel, would be to assign the ECB the role of “employer of last resort,” using “quantitative easing” to hire the unemployed at a basic wage.

A fourth possibility would be for member countries to set up publicly-owned “development banks” on the Chinese model. These banks could issue credit in Euros for public projects, creating jobs and expanding the money supply in the same way that private banks do every day when they make loans. Private banks today are limited in their loan-generating potential by the capital requirement, toxic assets cluttering their books, a lack of creditworthy borrowers, and a business model that puts shareholder profit over the public interest. Publicly-owned banks would have the assets of the state to draw on for capital, a clean set of books, a mandate to serve the public, and a creditworthy borrower in the form of the nation itself, backed by the power to tax.

Unlike the EMU countries, the governments of England, the United States, and other sovereign nations can still borrow from their own central banks, funding much-needed programs essentially interest-free. They can but they probably won’t, because they have been deceived into relinquishing that sovereign power to an overreaching financial sector bent on controlling the money systems of the world privately and autocratically. Professor Carroll Quigley, an insider groomed by the international bankers, revealed this plan in 1966, writing in Tragedy and Hope:

[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.

Just as the EMU appeared to be on the verge of achieving that goal, however, it has started to come apart at the seams. Sovereignty may yet prevail.

IMMI attempts to tip the world balance toward press freedom by setting up Iceland as a Mecca of press and information freedom. Key provisions of the IMMI include: whistleblower protections; strong protections for anonymous sources and the journalists and media organizations who deal with them; a strengthening of protections against prior restraint by governments or through use of the courts; and protection for Internet Service Providers [ISPs], preventing them from being held responsible for information passing through their networks.

IMMI also includes provisions against the use of lawsuits to suppress information. Thus, under IMMI, Iceland would not enforce foreign judgments against ISPs and media organizations based in Iceland. Further, Icelandic-based organizations would have the right to file counter-suits in Iceland against attempts to suppress their free speech in other countries.

Additionally contained in IMMI are protections against misuses of court processes to suppress speech, allowing judges to decide that an issue before the court involves freedom of speech and thus trigger protections before those being sued are coerced into settling cases or submitting to abusive subpoenas due to inadequate resources to defend themselves.

If IMMI passes, Iceland’s actions could affect press freedoms elsewhere. Iceland’s internet servers would become available to reporters and bloggers around the world. These servers could hold documents and reports that governments or corporations are attempting to suppress and would come under Icelandic protections. The right to countersue against attempts at suppressing free speech elsewhere will provide some protection for journalists and media organizations in other countries used Icelandic servers.. While there is no guarantee that the right to countersue will deter all abuses, in many cases the threat of litigation, or even criminal penalties, in Iceland will constrain those who might otherwise move to suppress information.

In other cases, attempts to suppress free expression, such as a subpoena seeking the identity of a confidential source in other countries would be in violation of Icelandic laws, providing reporters and other information providers with leverage in their own countries. Thus, a reporter under pressure to reveal a source could argue that these demands would place that reporter afoul of Icelandic law. Some courts may respect this claim, since they would be unable to guarantee immunity for the reporter.

The IMMI arose out of last summer’s outrage at efforts by a Icelandic bank to suppress television reporting on a document leaked to Wikileaks — the internet haven for leaked documents — regarding the bank’s questionable financial dealings. Icelanders were outraged that their television station was enjoined from reporting on a document that was freely available on the web.

Wikileaks editors Julian Assange and Daniel Schmitt originally spearheaded the creation of IMMI and have moved to Iceland to help secure its passage. Wikileaks is well aware of the dangers of censorship as banks and several countries, including Australia and South Africa, have attempted to censor materials posted on Wikileaks. If IMMI passes, Iceland would become the perfect environment for Wikileaks to base its servers. Other media and information providers will likely follow suit and base their servers in Iceland to take advantage of its new protections.

IMMI thus could be a boon to Iceland’s economy, making it a center of the new information economy. But IMMI, because of its strong assist to transparency efforts like Wikileaks, also is seen by many Icelanders as a critical tool in preventing the next economic collapse through shedding light on murky questionable financial and other corporate dealings. As parliamentarian Birgitta Jónsdóttir stated:

“The collapse woke up the nation and by rallying together we pushed through historical changes. The government was forced to resign, the central bank manager was forced to resign, the head of the financial supervisory authority was forced to resign. The people of Iceland realized that by joining forces real change could and would take place.

People woke up to the fact that the infrastructure they had put their trust in, had failed. Our academics, the government, the parliament, the central bank, and the media had all failed. It made us understand that the media was weak, that there was a lack of transparency and that in order to live in a healthy society, we had take part in shaping it.

We have come to understand that fundamental changes need to take place to strengthen our democracy and that a new legislative package is needed to that promotes transparency and political accountability.

Because the world is connected by financial and information flows, suppression of the truth is not only our problem, but everyone’s problem. The right of the people to understand what is happening to their societies needs to be strengthened. I believe in supporting the world’s most courageous journalists and writers with the best legislation possible. That is why I am proud to be a part of the Icelandic Modern Media Initiative.

IMMI was introduced into parliament February 17 by 19 parliamentary representatives from all parties in parliament, almost a third of the 63 MPs. It will be voted on in April or May of this year. Passage will constitute one of the most important blows for democracy and transparency anywhere in years. It will also be a rare rebuke to the growing power of corporations and governments to restrict information flow world-wide.

The Icelandic Modern Media Initiative addresses the key issues for free expression in the digital age, and may yet be the catalyst for the kind of legislative reforms that all 21st Century democracies will need.

– Index on Censorship

I am proud to advise the Icelandic Modern Media Initiative’s proposal to create a global safe haven for investigative journalism. I believe this proposal is a strong way of encouraging integrity and responsive government around the world, including in Iceland. In my work investigating corruption I have seen how important it is to have have robust mechanisms to get information out to the public. Iceland, with its fresh perspectives and courageous, independent people seems to be the perfect place to initiate such an effort towards global transparency and justice.

– Eva Joly MEP

Iceland is at a unique crossroads. Because of an economic meltdown in the banking sector, a deep sense is among the nation that a fundamental change is needed in order to prevent such events from taking place again. At such times it is important to seek a collective future vision and take a course that will bring the nation and the parliament closer together.

On February 17th a parliamentary resolution will be filed at the Icelandic parliament suggesting that Iceland will position itself legally with regard to the protection of freedoms of expression and information. This suggestion for a future vision has sparked great enthusiasm both within the parliament and among those it has been introduced to.

According to Reporters Sans Frontiers (RSF), Iceland went from being placed first in the world for freedom of expression (2007) to 9th (2009). It is time this trend was rectified.

The goal of the IMMI proposal is to task the government with finding ways to strengthen freedom of expression around world and in Iceland, as well as providing strong protections for sources and whistleblowers. To this end the legal environment should be explored in such a way that the goals can be defined, and changes to law or new law proposals can be prepared. The legal environments of other countries should be considered, with the purpose of assembling the best laws to make Iceland a leader of freedoms of expression and information. We also feel it is high time to establish the first Icelandic international prize: The Icelandic Freedom of Expression Award.

This proposal does not belong to any single group or party, but should be considered a joint project of all parliamentarians to find a harmonious tone of reconciliation in order to pull the nation out of these difficulties with something to achieve together.

We have already been in touch with, and introduced the proposal to, various interest groups whom this new legislation package might affect, including industry, media and civil society. So far we have only received positive feedback from all levels.

A keen interest has developed among the foreign press in relation to this legislative proposal, perhaps because all over the world the freedom to write news is increasingly being smothered. In their mind Iceland could become the anti-dote to tax havens: a journalism paradise.

The suggestions in the proposal for a legislative package would transform the possibilities for growth in various areas. Iceland could become an ideal environment for Internet-based international media and publishers to register their services, start-ups, data centers and human rights organizations. It could be a lever for the economy and create new work employment opportunities.

If this proposal became a reality it could improve democracy and transparency in Iceland, as firm grounding would be made for publishing, whilst improving Iceland’s standing in the international community.

The public is angry. Why should the public pay for the bankers mistakes.

– Iceland blogger Halldor Sigurdsson

Who cleans up the mess when ignorant, greedy bankers rack up massive debt then go broke? The people of Iceland made a strong statement Saturday. The sins of big bankers and government regulators shouldn’t fall on the citizens. By a 93% to 2% margin, they voted down a proposal requiring them to cover bad debt incurred by one of the nation’s oldest and largest banks. Covering the debt would have cost Iceland’s 317,000 citizens around $17,000 each.

Iceland’s national referendum was the first opportunity for the people of any nation to vote directly on who pays when the financial elite fail.

As citizens voted, Iceland’s Prime Minister was dismissing the importance of the vote and promising to negotiate a payment scheme obligating citizen subsidies for bad debt created by Iceland’s beyond-bad bankers.

Icelanders are struggling with a collapsed economy. Businesses are failing at a startling rate, unemployment is soaring, and the prospects for the future are simply not there. Yet the British and Dutch governments demand that their swindled citizens receive compensation from beleaguered Icelanders. Where were the British and Dutch central banks and politicians while their citizens were being fleeced? Aren’t the rulers of these countries aware that the failed Icelandic bank was owned by wealth investors, not the citizens?

Iceland’s size and the very dire circumstances offer a focused preview for citizens around the world. The banks make bad deal after bad deal. When they’re about to fail, the government steps in with a taxpayer bailout. It doesn’t matter which faction of the narrow political spectrum is in charge. The message is starkly clear — when the banks fail, you pay. The solution is presented to citizens as a fait accompli, a mandatory submission to indefinite financial slavery for the benefit of the failed financial elite. The will of the people doesn’t matter even when there’s a direct vote.

The failed financial enterprises that control global commerce are opening their new show on the road in Iceland. Greek citizens are next in line for indentured servitude, thanks to their lying leaders and Wall Street’s Goldman Sachs.

Citizens in the United States remain overwhelmingly opposed to bailouts for Wall Street and big banks. Like Iceland’s Prime Minister, members of Congress and the president don’t care. Big banks have now received at least $12 trillion in credit and cash from the US Treasury and Federal Reserve Bank. The 17 million citizens out of work, their families, and the eight million forced to work reduced hours are barely mentioned and get just a pittance compared to the ultra wealthy bankers.

How did the financial elite and their political minions do it in Iceland? The lesson is instructive.

Tiny Iceland‘s Bankers Fool British and Dutch Regulators

Iceland’s second largest bank wanted some new customers. In 2006, the bank created the Icesave banking service. For the British market, Icesave pushed high fixed interest rates and easy access to online banking. The Netherlands sales pitch was based on banking transparency, seeing how the bank functioned online, with a 5% interest rate on deposits.

British regulators voiced no major problem with Icesave’s policies until the bank collapsed in October 2008. The Netherlands central bank (just now in a liquidity crisis) gave its stamp of approval to Icesave even though there were substantial warning signs that the bank was in trouble.

By the time Icesave was insolvent, its 300,000 British depositors and over 100,000 in the Netherlands saw their money vanish. The finger pointing began. The Dutch central bank claimed Iceland’s regulators lied to them. British regulators were shocked at the disarray of Iceland’s banking system.

Dutch and British regulators failed to mention that they’d outsourced regulation for their citizens to tiny Iceland’s central bank. These financially savvy nations couldn’t be bothered with their own people until the Icesave scheme did its damage.

Dutch and British political leaders somehow forgot to mention that Sweden and Norway insured the deposits of their citizens when another Icelandic bank failed in those countries.

Icelanders Stuck with the Bill

Icesave’s failed business tactics, negligent regulation by Iceland’s government, and indifferent British and Dutch authorities created the problem. But citizens are taking the fall. The usual suspect, the International Monetary Fund (IMF), offered up billions in cash in return for covering the lost deposits for British and Dutch citizens. IMF backed off of this position as it became clear that Icelanders would reject the March 6 referendum.

Ultimately, the financial machinations by international bankers and G-20 leaders don’t matter. The people of Iceland are in no position to pay the bill. Pretending otherwise only prolongs the charade of some order for the comatose global financial system. Who benefits? The financial elite who continue to accumulate more and more money as though it’s actually worth something.

Furious Citizens – Bloggers Won’t Give Up

Icelanders take their voting seriously. Turnout is usually above 80%. But the turnout for this referendum was 57%, the lowest figure in years.

The very good news is that Icelanders are providing real analysis and hitting the streets on a regular basis to protest the big con pulled by their leaders and financial elite. This is a sample of the vibrant dialog of the people who choose to fight back.

Independent Icelandic News – The Icesave Fraud Case

"The public was deliberately lied to and the deception was complete. The banks fell, the Brits and Dutch, and Germans too are pissed off and we Icelanders have to loose our savings, our homes, our jobs, our dignity. We also have to pay for the Germans, the Dutch and the Brits.

"We are only starting to ‘feel the cold dead hand of the neoconservatist financial free market monster’ that tore through the world and is still squeezing the Icelandic nation, even after its death. We don’t get a recession, we get a complete collapse." June 23, 2009

*****

Economic Disaster Area – Arrogant, Humiliating, Short Sighted, and Stupid

"Right now the nation is numb. Everyone is waiting for something while trying to stay afloat. Businesses and individuals who have been watching their cash fly out the window atop exorbitant interest rates for years are experiencing a drowning feeling. It seems like many are just shutting their eyes and resigning their fate to fate itself while still waiting for rescue to appear somewhere on the horizon.

"Most people agree that something must be done. They just cannot agree on what exactly." @ Dadi, May 24

*****

The Iceland Weather Report – Johanna (Iceland’s Prime Minister) sends a clear message

"As if the government wasn’t in enough trouble with public opinion here at home, Prime Minister Johanna Sigurðardóttir has publicly announced that she plans to shun the referendum tomorrow.

‘To me it is pointless and I find it is very sad that the first referendum since the founding of the republic revolves around legislation that is already obsolete. Consequently I see no point in taking part in this referendum,’ (said Iceland’s Prime Minister). alda March 5, 2010

*****

Iceland Banking Crisis News and More

"According to numbers, 1.5 % percent have said yes to the agreement to pay Icesave, but 93.6 say not to that. But this does not change anything. The Prime minister and finance minister say that there is a new deal on the table. Iceland’s President says that a Referendum makes the democracy stronger. The outcome of the referendum does not have any affect on the government in Iceland." Halldor Sigurdsson, Mar 7

*****

Economic Disaster Area – National Referendum – A Sad Day for Democracy in Iceland

"Tomorrow is the first national referendum Icelandic citizens have been allowed to participate in by the political elite since the conception of the republic in 1944. By all measures, this should be a happy day for democracy in Iceland.

"But instead it is not a cause for celebration but a large milestone in the farcical power play which has taken place between the four largest political movements in Iceland since 1944.

"Yes, a farce.’Isn‘t that what this whole thing really is’, asked a Dutch journalist yesterday after surveying the scene? It is a sad day.’ March 5 @ Dadi

2. There’s no such thing as a ‘natural’ disaster. 200,000 Haitians have been slaughtered by slum housing and IMF “austerity” plans.

3. A friend of mine called. Do I know a journalist who could get medicine to her father? And she added, trying to hold her voice together, “My sister, she’s under the rubble. Is anyone going who can help, anyone?” Should I tell her, “Obama will have Marines there in ‘a few days’”?

4. China deployed rescuers with sniffer dogs within 48 hours. China, Mr. President. China: 8,000 miles distant. Miami: 700 miles close. US bases in Puerto Rico: right there.

5. Obama’s Defense Secretary Robert Gates said, “I don’t know how this government could have responded faster or more comprehensively than it has.” We know Gates doesn’t know.

6. From my own work in the field, I know that FEMA has access to ready-to-go potable water, generators, mobile medical equipment and more for hurricane relief on the Gulf Coast. It’s all still there. Army Lt. Gen. Russel Honoré, who served as the task force commander for emergency response after Hurricane Katrina, told the Christian Science Monitor, “I thought we had learned that from Katrina, take food and water and start evacuating people.” Maybe we learned but, apparently, Gates and the Defense Department missed school that day.

7. Send in the Marines. That’s America’s response. That’s what we’re good at. The aircraft carrier USS Carl Vinson finally showed up after three days. With what? It was dramatically deployed — without any emergency relief supplies. It has sidewinder missiles and 19 helicopters.

8. But don’t worry, the International Search and Rescue Team, fully equipped and self-sufficient for up to seven days in the field, deployed immediately with ten metric tons of tools and equipment, three tons of water, tents, advanced communication equipment and water purifying capability. They’re from Iceland.

9. Gates wouldn’t send in food and water because, he said, there was no “structure … to provide security.” For Gates, appointed by Bush and allowed to hang around by Obama, it’s security first. That was his lesson from Hurricane Katrina. Blackwater before drinking water.

10. Previous US presidents have acted far more swiftly in getting troops on the ground on that island. Haiti is the right half of the island of Hispaniola. It’s treated like the right testicle of Hell. The Dominican Republic the left. In 1965, when Dominicans demanded the return of Juan Bosch, their elected President, deposed by a junta, Lyndon Johnson reacted to this crisis rapidly, landing 45,000 US Marines on the beaches to prevent the return of the elected president.

11. How did Haiti end up so economically weakened, with infrastructure, from hospitals to water systems, busted or non-existent — there are two fire stations in the entire nation — and infrastructure so frail that the nation was simply waiting for “nature” to finish it off?

Don’t blame Mother Nature for all this death and destruction. That dishonor goes to Papa Doc and Baby Doc, the Duvalier dictatorship, which looted the nation for 28 years. Papa and his Baby put an estimated 80% of world aid into their own pockets — with the complicity of the US government happy to have the Duvaliers and their voodoo militia, Tonton Macoutes, as allies in the Cold War. (The war was easily won: the Duvaliers’ death squads murdered as many as 60,000 opponents of the regime.)

12. What Papa and Baby didn’t run off with, the IMF finished off through its “austerity” plans. An austerity plan is a form of voodoo orchestrated by economists zomby-fied by an irrational belief that cutting government services will somehow help a nation prosper.

13. In 1991, five years after the murderous Baby fled, Haitians elected a priest, Jean-Bertrand Aristide, who resisted the IMF’s austerity diktats. Within months, the military, to the applause of Papa George HW Bush, deposed him. History repeats itself, first as tragedy, then as farce. The farce was George W. Bush. In 2004, after the priest Aristide was re-elected President, he was kidnapped and removed again, to the applause of Baby Bush.

14. Haiti was once a wealthy nation, the wealthiest in the hemisphere, worth more, wrote Voltaire in the 18th century, than that rocky, cold colony known as New England. Haiti’s wealth was in black gold: slaves. But then the slaves rebelled — and have been paying for it ever since.

From 1825 to 1947, France forced Haiti to pay an annual fee to reimburse the profits lost by French slaveholders caused by their slaves’ successful uprising. Rather than enslave individual Haitians, France thought it more efficient to simply enslave the entire nation.

15. Secretary Gates tells us, “There are just some certain facts of life that affect how quickly you can do some of these things.” The Navy’s hospital boat will be there in, oh, a week or so. Heckuva job, Brownie!

16. Note just received from my friend. Her sister was found, dead; and her other sister had to bury her. Her father needs his anti-seizure medicines. That’s a fact of life too, Mr. President.

Through our journalism network, we are trying to get my friend’s medicines to her father. If any reader does have someone getting into or near Port-au-Prince, please contact moc.tsalaPgerGnull@itiaH immediately.

Urgently recommended reading: The Black Jacobins: Toussaint L’Ouverture and the San Domingo Revolution, the history of the successful slave uprising in Hispaniola by the brilliant CLR James.

First appeared in The Huffington Post.

Total financial collapse, once a problem only for developing countries, has now come to Europe. The International Monetary Fund is imposing its “austerity measures” on the outer circle of the European Union, with Greece, Iceland and Latvia the hardest hit. But these are not your ordinary third world debtor supplicants. Historically, Icelanders are Vikings, the people who conquered much of Europe; Latvian tribes repulsed the Vikings; and the Greeks conquered the whole Persian empire. If anyone can stand up to the IMF, these stalwart European warriors can.

Dozens of countries have defaulted on their debts in recent decades, the most recent being Dubai, which declared a debt moratorium on November 26, 2009. If the once lavishly-rich Arab emirate can default, more desperate countries can; and when the alternative is to destroy the local economy, it is hard to argue that they shouldn’t. That is particularly true when the creditors are largely responsible for the debtor’s troubles, and there are good grounds for arguing the debts are not owed. Greece’s troubles originated when low interest rates that were inappropriate for Greece were maintained to rescue Germany from an economic slump. And Iceland and Latvia have been saddled with responsibility for private obligations to which they were not parties. Economist Michael Hudson writes:

The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts … but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders.

The Dysfunctional EU: Where a Common Currency Fails

Greece may be the first in the EU outer circle to revolt. According to Ambrose Evans-Pritchard in Sunday’s Daily Telegraph, “Greece has become the first country on the distressed fringes of Europe’s monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation.” Prime Minister George Papandreou said on Friday:

“Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state.”

Notes Evans-Pritchard: “Mr Papandreou has good reason to throw the gauntlet at Europe’s feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating.”

The currency cannot be devalued because the same Euro is used by all. That means that while the country’s ability to repay is being crippled by austerity measures, there is no way to lower the cost of the debt. Evans-Pritchard concludes:

“The deeper truth that few in Euroland are willing to discuss is that EMU is inherently dysfunctional – for Greece, for Germany, for everybody.”

Which is all the more reason that Iceland, which is not yet a member of the EU, might want to reconsider its position. As a condition of membership, Iceland is being required to endorse an agreement in which it would reimburse Dutch and British depositors who lost money in the collapse of IceSave, an offshore division of Iceland’s leading private bank. Eva Joly, a Norwegian-French magistrate hired to investigate the Icelandic bank collapse, calls it blackmail. She warns that succumbing to the EU’s demands will drain Iceland of its resources and its people, who are being forced to emigrate to find work.

Latvia is a member of the EU and is expected to adopt the Euro, but it has not yet reached that stage. Meanwhile, the EU and IMF have told the government to borrow foreign currency to stabilize the exchange rate of the local currency, in order to help borrowers pay mortgages taken out in foreign currencies from foreign banks. As a condition of IMF funding, the usual government cutbacks are also being required. Nils Muiznieks, head of the Advanced Social and Political Research Institute in Riga, Latvia, complained:

“The rest of the world is implementing stimulus packages ranging from anywhere between one percent and ten percent of GDP but at the same time, Latvia has been asked to make deep cuts in spending – a total of about 38 percent this year in the public sector – and raise taxes to meet budget shortfalls.”

In November, the Latvian government adopted its harshest budget of recent years, with cuts of nearly 11%. The government had already raised taxes, slashed public spending and government wages, and shut dozens of schools and hospitals. As a result, the national bank forecasts a 17.5% decline in the economy this year, just when it needs a productive economy to get back on its feet. In Iceland, the economy contracted by 7.2% during the third quarter, the biggest fall on record. As in other countries squeezed by neo-liberal tourniquets on productivity, employment and output are being crippled, bringing these economies to their knees.

The cynical view is that that may have been the intent. Instead of helping post-Soviet nations develop self-reliant economies, writes Marshall Auerback, “the West has viewed them as economic oysters to be broken up to indebt them in order to extract interest charges and capital gains, leaving them empty shells.”

But the people are not submitting quietly to all this. In Latvia last week, while the Parliament debated what to do about the nation’s debt, thousands of demonstrating students and teachers filled the streets, protesting the closing of a hundred schools and reductions in teacher salaries of up to 60%. Demonstrators held signs saying, “They have sold their souls to the devil” and “We are against poverty.” In the Iceland Parliament, the IceSave debate had been going on for over 140 hours at last report, a new record; and a growing portion of the population opposes underwriting a debt they believe the government does not owe.

In a December 3 article in The Daily Mail titled “What Iceland Can Teach the Tories,” Mary Ellen Synon wrote that ever since the Icelandic economy collapsed last year, “the empire builders of Brussels have been confident that the bankrupt and frightened Icelanders must finally be ready to exchange their independence for the ‘stability’ of EU membership.” But last month, an opinion poll showed that 54 percent of all Icelanders oppose membership, with just 29 percent in favor. Synon wrote:

“The Icelanders may have been scared out of their wits last year, but they are now climbing out from under the ruins of their prosperity and have decided that the most valuable thing they have left is their independence. They are not willing to trade it, not even for the possibility of a bail-out by the European Central Bank.”

Iceland, Latvia and Greece are all in a position to call the bluff of the IMF and EU. In an October 1 article called “Latvia – the Insanity Continues,” Marshall Auerback maintained that Latvia’s debt problem could be fixed over a weekend, by a list of measures including (1) not answering the phone when foreign creditors call the government; (2) declaring the banks insolvent, converting their external debt to equity, and having them reopen with full deposit insurance guaranteed in local currency; and (3) offering “a local currency minimum wage job that includes healthcare to anyone willing and able to work as was done in Argentina after the Kirchner regime repudiated the IMF’s toxic package of debt repayment.”

Evans-Pritchard suggested a similar remedy for Greece, which he said could break out of its death loop by following the lead of Argentina. It could “restore its currency, devalue, pass a law switching internal euro debt into [the local currency], and ‘restructure’ foreign contracts.”

The Road Less Traveled: Saying No to the IMF

Standing up to the IMF is not a well-worn path, but Argentina forged the trail. In the face of dire predictions that the economy would collapse without foreign credit, in 2001 it defied its creditors and simply walked away from its debts. By the fall of 2004, three years after a record default on a debt of more than $100 billion, the country was well on the road to recovery; and it achieved this feat without foreign help. The economy grew by 8 percent for 2 consecutive years. Exports increased, the currency was stable, investors were returning, and unemployment had eased. “This is a remarkable historical event, one that challenges 25 years of failed policies,” said economist Mark Weisbrot in a 2004 interview quoted in the New York Times. “While other countries are just limping along, Argentina is experiencing very healthy growth with no sign that it is unsustainable, and they’ve done it without having to make any concessions to get foreign capital inflows.”

Weisbrot is co-director of a Washington-based think tank called the Center for Economic and Policy Research, which put out a study in October 2009 of 41 IMF debtor countries. The study found that the austere policies imposed by the IMF, including cutting spending and tightening monetary policy, were more likely to damage than help those economies.

That was also the conclusion of a study released last February by Yonca Özdemir from the Middle East Technical University in Ankara, comparing IMF assistance in Argentina and Turkey. Both emerging markets faced severe economic crises in 2001, preceded by chronic fiscal deficits, insufficient export growth, high indebtedness, political instability, and wealth inequality.

Where Argentina broke ranks with the IMF, however, Turkey followed its advice at every turn. The end result was that Argentina bounced back, while Turkey is still in financial crisis. Turkey’s reliance on foreign investment has made it highly susceptible to the global economic downturn. Argentina chose instead to direct its investment inward, developing its domestic economy.

To find the money for this development, Argentina did not need foreign investors. It issued its own money and credit through its own central bank. Earlier, when the national currency collapsed completely in 1995 and again after 2000, Argentine local governments issued local bonds that traded as currency. Provinces paid their employees with paper receipts called “Debt-Cancelling Bonds” that were in currency units equivalent to the Argentine Peso. The bonds canceled the provinces’ debts to their employees and could be spent in the community. The provinces had actually “monetized” their debts, turning their bonds into legal tender.

Argentina is a large country with more resources than Iceland, Latvia or Greece, but new technologies are now available that could make even small countries self-sufficient. See David Blume, “Alcohol Can Be a Gas.”

Local Currency for Local Development

Issuing and lending currency is the sovereign right of governments, and it is a right that Iceland and Latvia will lose if they join the EU, which forbids member nations to borrow from their own central banks. Latvia and Iceland both have natural resources that could be developed if they had the credit to do it; and with sovereign control over their local currencies, they could get that credit simply by creating it on the books of their own publicly-owned banks.

In fact, there is nothing extraordinary in that proposal. All private banks get the credit they lend simply by creating it on their books. Contrary to popular belief, banks do not lend their own money or their depositors’ money. As the U.S. Federal Reserve attests, banks lend new money, created by double-entry bookkeeping as a deposit of the borrower on one side of the bank’s books and as an asset of the bank on the other.

Besides thawing frozen credit pipes, credit created by governments has the advantage that it can be issued interest-free. Eliminating the cost of interest can cut production costs dramatically.

Government-issued money to fund public projects has a long and successful history, going back at least to the early eighteenth century, when the American colony of Pennsylvania issued money that was both lent and spent by the local government into the economy. The result was an unprecedented period of prosperity, achieved without producing price inflation and without taxing the people.

The island state of Guernsey, located in the Channel Islands between England and France, has funded infrastructure with government-issued money for over 200 years, without price inflation and without government debt.

During the First World War, when private banks were demanding 6 percent interest, Australia’s publicly-owned Commonwealth Bank financed the Australian government’s war effort at an interest rate of a fraction of 1 percent, saving Australians some $12 million in bank charges. After the First World War, the bank’s governor used the bank’s credit power to save Australians from the depression conditions prevailing in other countries, by financing production and home-building and lending funds to local governments for the construction of roads, tramways, harbors, gasworks, and electric power plants. The bank’s profits were paid back to the national government.

A successful infrastructure program funded with interest-free national credit was also instituted in New Zealand after it elected its first Labor government in the 1930s. Credit issued by its nationalized central bank allowed New Zealand to thrive at a time when the rest of the world was struggling with poverty and lack of productivity.

The argument against governments issuing and lending money for infrastructure is that it would be inflationary, but this need not be the case. Price inflation results when “demand” (money) increases faster than “supply” (goods and services). When the national currency is expanded to fund productive projects, supply goes up along with demand, leaving consumer prices unaffected.

In any case, as noted above, private banks themselves create the money they lend. The process by which banks create money is inherently inflationary, because they lend only the principal, not the interest necessary to pay their loans off. To come up with the interest, new loans must be taken out, continually inflating the money supply with new loan-money. And since the money is going to the creditors rather than into producing new goods and services, demand (money) increases without increasing supply, producing price inflation. If credit were extended for public infrastructure projects interest-free, inflation could actually be reduced, by reducing the need to continually take out new loans to find the elusive interest to service old loans.

The key is to use the newly-created money or credit for productive projects that increase goods and services, rather than for speculation or to pay off national debt in foreign currencies (the trap that Zimbabwe fell into). The national currency can be protected from speculators by imposing exchange controls, as Malaysia did in 1998; imposing capital controls, as Brazil and Taiwan are doing now; banning derivatives; and imposing a “Tobin tax,” a small tax on trade in financial products.

Making the Creditors Whole

If the creditors are really interested in having their debts repaid, they will see the wisdom of letting the debtor nation build up its producing economy to give it something to pay with. If the creditors are not really interested in repayment but are using the debt as a tool to exploit the debtor country and strip it of its assets, the creditors’ bluff needs to be called.

When the debtor nation refuses to pay, the burden shifts to the creditors to make themselves whole. British economist Michael Rowbotham suggests that in the modern world of electronic money, this can be accomplished by creative banking regulators simply with a change in accounting rules. “Debt” today is created with accounting entries, and it can be reversed with accounting entries. Rowbotham outlines two ways the rules might be changed to liquidate impossible-to-repay debt:

The first option is to remove the obligation on banks to maintain parity between assets and liabilities …. Thus, if a commercial bank held $10 billion worth of developing country debt bonds, after cancellation it would be permitted in perpetuity to have a $10 billion dollar deficit in its assets. This is a simple matter of record-keeping.

The second option … is to cancel the debt bonds, yet permit banks to retain them for purposes of accountancy. The debts would be cancelled so far as the developing nations were concerned, but still valid for the purposes of a bank’s accounts. The bonds would then be held as permanent, non-negotiable assets, at face value.

If the banks were allowed either to carry unrepayable loans on their books or to accept payment in local currency, their assets and their solvency would be preserved. Everyone could shake hands and get back to work.

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.