Monday, April 9, 2012
Tuesday, August 2, 2011
As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here's why:
Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors. But as investments grew, so did the banks’ foreign debt. In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.
Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain.
Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The IMF and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.
Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.
What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.
Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country. As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF. The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North. But if we had accepted, we would have become the Haiti of the North.” (Cubans see the situation in Haiti, they count themselves lucky.)
In the March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.
But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish constitution being that the word ‘president’ replaced the word ‘king’.)
To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the Internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.
Some readers will remember that Iceland’s ninth century agrarian collapse was featured in Jared Diamond’s book by the same name. Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution. And those of Italy, Spain and Portugal are facing the same threat.
They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign. The people of Iceland took a stand against fraudulently created debt and refused to pay it. The United States placates to our creditors as if they have the capabilities to "get" their money by force. Most of our "so-called" deficit was created by Credit Default Swaps, Junk Bonds and Speculation. Now the New Debt Deal is cutting much needed social programs so that the United States can pay back some of this fraudulent debt to the same Banking Conglomerates that created this mess in the first place. Iceland is refusing to bow to the International Banking Bullies like the rest of the world. I don't think that it is a coincidence that no news outlet is reporting this story, they don't want citizens of other countries to get the same idea. The IMF is just a Puppet of the International Banking Community, The loans they give never work and usually leave the country who undertakes an IMF loan in worse shape, these loans are usually cannot be paid back and the country is often forced to sell its Utilities, natural resources or inexpensive labor to foreign interests. The foreign Interests maximize their profits and leave the country in even worse shape than before. Iceland should consider itself lucky because an IMF loan would only exacerbate their situation. Other European countries with financial difficulties are taking on austerity measures that punish the working class but do not effect the banking conglomerates that torpedoed the countries' finances in the first place. These Austerity measures will ostracize the working class/middle class even further and lead to large scale protests and work stoppages. Countries like Spain, Greece and Portugal are demonstrating that they care about their relationships with the banking conglomerates more than the relationship with their own citizens. This is why I applaud Iceland for giving the IMF and their cronies the cold shoulder.
Tuesday, April 12, 2011
Tuesday, March 8, 2011
Thursday, February 17, 2011
Fewer Americans are falling behind on their mortgage payments; in fact, the fewest in two years. Mortgages just one payment past due fell to their lowest level since just before the recession began. Is it delays in paperwork from insufficient paperwork and the foreclosure servicing scandal? No. It's actual fundamentals in the economy and the mortgage market. This may seem like a surprise to many how work in the industry.
It is interesting to note that as we got toward the end of 2010 we began to see another drop in weekly claims for unemployment insurance. I think that's a key driver of the short term delinquencies but many of those figure scan be shewed due to the way unemployment figures are reported. They are based on claims and if an individual doesn't make a claim, it may mean that he or she found employment or it can also mean that they simply ran out of unemployment benefits.
But even more significant is the improved underwriting that began after the mortgage market crashed. We're now past the delinquency peak on loans that were underwritten during the worst phase of the housing boom in 2006 and 2007.
The national delinquency rate fell 10 percent in the fourth quarter of last year to 8.22 percent, according to the Mortgage Bankers Association's latest survey. That's still high by historical standards, but it's a huge improvement. It's also good to see that the FHA delinquency rate improved slightly, from 12.62 percent to 12.26 percent, which is still high based on past years but a step in the right direction.