Archive for the ‘Iceland’ tag
by James Howard Kunstler
History, that coy dominatrix, loves to trick the credulous human race. In a moment when something we call “democracy” seems to be spreading through the dodgy precincts of the world like a contagion of virtue, the trend is actually going the other way in countries that have practiced it for a while.
That is certainly the case in Europe, especially Greece right now, where the mobs in Syntagma Square denounce their waffling parliament for agreeing to a bailout deal that will make Greece a step-child of Germany. The German voters are none too pleased with this, either, since their country is now on the hook to pay Greece’s bills. Ireland, Portugal, and Belgium are standing by for adoption next in Europe’s Home for Wayward Children. Spain and Italy may need to become wards of the Euro-state, too, but they are more like adults with drinking problems who are liable to wreck the whole household if invited in.
Anyway, the Greeks rallying in Athens’ central square lately are sick of politicians and parliaments, and there is a no small danger that they will soon rise up and dispense with theirs in the dumpster behind the Parthenon. A man in a uniform has a certain appeal in a situation like this. He is comfortable issuing orders in unfavorable situations, in fact, rather thrives on it. The Germans know all about this. Their “savior” back in the 20th century was a fellow in an ersatz military getup who virtually ran for office by denouncing “parliamentarism” and by the time his party occupied a fair portion of the seats in theirs, he burned the darn thing to the ground.
The Irish gaze longingly at little Iceland, out there in the North Atlantic now free of debt obligations from the simple act of raising the middle finger in the direction of the London banks. Ireland is sore tempted to do likewise, and the act would have an appealing historical symmetry to it. They may toss out their parliament to get to it. Staying sober is another matter. In Portugal, they are too busy having lunch, which is a very serious affair, they will assure you, and undertaken in spirit of absolute Iberian fatalism (that beefsteak died for you!). Oh, for the days of Salazar when lunch was decreed eighteen hours a day! Belgium, of course, will always be hopeless – Europe’s doormat. And what can you say about a people who slather mayonnaise on their French fries – apart from their amazing failure to discover the miracle of ketchup, despite being overrun by American GIs sixty-odd years ago – and speaking a language that nobody has ever written rock and roll song in.
Europe is held together with baling twine, masking tape, and spit. It’s been a fun half-century catering to harmless clownish tourists from Houston, with their “big boss” belt buckles and decoupaged wives. But lately the Chinese visitors look more like bargain-hunters at the preview of an estate auction, sizing up the merchandise, and even the waiters in the cafes know the score. The Grand Palace of Euroland is closing for business. Anybody who thinks that Germany is going to run some kind of halfway house for crackhead countries “in recovery” will be disappointed. The compressive contraction that grips the OECD like economic Lou Gehrig disease will be with us as far ahead as anyone can see.
For sure, there are features of European life that dispose many of its countries to face the long emergency on much better terms than the train wreck across the Atlantic. They know how to get by on much less oil – though the coming energy crisis will still be hard on them. They have excellent public transit already in place (yes, it depends on the energy situation). Their agriculture is scaled much more intelligently. Their cities, too, with some exceptions. But they have a long history of brawling amongst themselves and the recent half-century of peace and prosperity is already taking on the shimmer of a fading mirage. Europe is burning down financially from the outside in while the monster that was known as the global economy lies gasping on the rocky shore of Fukushima. The Euro and the weak political union that went with it, is toast. You can include the outsider England in all that, since their practical circumstances are no better than Spain’s or Italy’s – perhaps a little worse, even… poor tattered Old Blighty!
By the way, I hope you don’t think the homefolks here in the USA are all that deliriously happy with representative government either. These days, despite all Sarah Palin’s bluster about “freedom” and “our heritage,” elected officials are held in about equal esteem to herpes viruses. Congress and the senate are paralyzed by triviality and the President is too busy golfing to disturb the status quo – which is the status quo of a house on fire. We won’t have to wait much longer to find out how unexceptional America actually is.
It’s a darn shame, and I mean that literally, because this is exactly what the American public is so ashamed of, and why appeals to the repressed sense of shame based on hyper-patriotic bluster, are so successful. It allows folks to feel great about themselves while they sink into the ooze. It’s okay, we’re special. I stopped at a convenience store at the edge of the Adirondack Mountains on Saturday afternoon and a more frightening gaggle of disfigured mutts I have never seen before. Has everybody in upstate New York only just been released from prison? The tattoo craze is especially telling. It’s one thing to get some tattoos with the idea that you are artfully expressing something. It’s another thing to deploy them around your body parts as though you were slapping decals on a 1989 beater car. These mutts had tattoos on their necks, their boobs, the sides of their heads, their knuckles, their ankles. The idea, apparently, is to make yourself appear as frightening as possible – and I can tell you it is a very successful initiative. Can lady Gaga please write us a new national anthem: America the horror movie.
Michael Hudson: Breakup Of The Euro? Is Iceland’s Rejection of Financial Bullying A Model For Greece And Ireland?
Yves here. This piece describes how voter opposition may derail rule by bankers via IMF, European Commission, and ECB austerity programs in Europe.
By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. Cross posted from CounterPunch.
Last month Iceland voted against submitting to British and Dutch demands that it compensate their national bank insurance agencies for bailing out their own domestic Icesave depositors. This was the second vote against settlement (by a ratio of 3:2), and Icelandic support for membership in the Eurozone has fallen to just 30 percent. The feeling is that European politics are being run for the benefit of bankers, not the social democracy that Iceland imagined was the guiding philosophy – as indeed it was when the European Economic Community (Common Market) was formed in 1957.
By permitting Britain and the Netherlands to blackball Iceland to pay for the mistakes of Gordon Brown and his Dutch counterparts, Europe has made Icelandic membership conditional upon imposing financial austerity and poverty on the population – all to pay money that legally it does not owe. The problem is to find an honest court willing to enforce Europe’s own banking laws placing responsibility where it legally lies.
The reason why the EU has fought so hard to make Iceland’s government take responsibility for Icesave debts is what creditors call “contagion.” Ireland and Greece are faced with much larger debts. Europe’s creditor “troika” – the European Central Bank (ECB), European Commission and the IMF – view debt write-downs and progressive taxation to protect their domestic economies as a communicable disease.
Like Greece, Ireland asked for debt relief so that its government would not be forced to slash spending in the face of deepening recession. “The Irish press reported that EU officials ‘hit the roof’ when Irish negotiators talked of broader burden-sharing. The European Central Bank is afraid that any such move would cause instant contagion through the debt markets of southern Europe,” wrote one journalist, warning that the cost of taking reckless public debt onto the national balance sheet threatened to bankrupt the economy. Europe – in effect, German and Dutch banks – refused to let the government scale back the debts it had taken on (except to smaller and less politically influential depositors). “The comments came just as the EU authorities were ruling out investor ‘haircuts’ in Ireland, making this a condition for the country’s €85bn (£72bn) loan package. Dublin has imposed 80 percent haircuts on the junior debt of Anglo Irish Bank but has not extended this to senior debt, viewed as sacrosanct.”
At issue from Europe’s vantage point – at least that of its bankers – is a broad principle: Governments should run their economies on behalf of banks and bondholders. They should bail out at least the senior creditors of banks that fail (that is, the big institutional investors and gamblers) and pay these debts and public debts by selling off enterprises and shifting the tax burden onto labor. To balance their budgets they are to cut back spending programs, lower public employment and wages, and charge more for public services from medical care to education.
This austerity program (“financial rescue”) has come to a head just one year after Greece was advanced $155 billion bailout package in May 2010. Displeased at how slowly the nation has moved to carve up its economy, the ECB has told Greece to start privatizing up to $70 billion by 2015. The sell-offs are to be headed by prime tourist real estate and the remaining government stakes in the national gambling monopoly OPAP, the Postbank, the Athens and Thessaloniki ports, the Thessaloniki Water and Sewer Company and the telephone monopoly. Jean-Claude Juncker, Luxembourg’s Prime Minister and chairman of the Eurozone’s group of finance ministers, warned that only if Greece agreed to start selling off assets (“consolidating its budget”) would the EU agree to stretch out loan maturities for Greek debt and “save” it from default.
The problem is that privatization and regressive tax shifts raise the cost of living and doing business. This makes economies less competitive, and hence even less able to pay debts that are accruing interest, leading toward a larger ultimate default. But turning debtor economies into a set of tollbooths to sell off remains the predatory textbook financial response.
Financial power is achieving what military conquest did in times past. Pretending to make indebted economies more competitive, the actual aim is to squeeze out enough payments so that bondholders (and indeed, voters) will not be obliged to confront the reality that many debts are unpayable except at the price of making the economy too debt-ridden, too regressively tax-ridden and too burdened with rising privatized infrastructure charges to be competitive.
Cutting back public spending and regressive tax shifts dry up capital investment and productivity. Such economies are run like companies taken over by debt-leveraged raiders on credit, who downsize and outsource their labor force so as to squeeze out enough revenue to pay their own creditors – who take what they can and run. The tactic of this financial attack is no longer overt military force as in days of yore, but something less costly because its victims submit more voluntarily. Third World countries demonstrated the destructive consequences from the 1970s onward under IMF austerity planning. Europe is now repeating the same shrinkage.
But the intended financial victims are fighting back. The attackers are not losing their armies and manpower, but their balance sheets are threatened – and hence their own webs of solvency with which they sought to entrap their prey. Greek labor unions (especially in the public enterprises being privatized), the ruling Socialist Party and leading minority parties rejected the radical sacrifices being demanded by Eurozone officials.
The bankers’ response was to insist that Greece respond to its wave of strikes and popular protest by suspending party politics and economic democracy. Financial planning be placed above party politics, and demanded “cross-party agreement on any overhaul of the bail-out.” “The government and the opposition should declare jointly that they commit to the reform agreements with the EU,” Mr. Juncker explained to Der Spiegel.
Criticizing Prime Minister George Papandreou’s delay at starting the sale of state assets, Europe’s financial planners proposed a national privatization agency to act as a face-saving “temporary” intermediary. The idea is to transfer revenue from these assets to foreign creditors – and to pledge its public assets as collateral to be forfeited in case of default in payments to government bondholders. Suggesting that the government “set up an agency to privatize state assets” along the lines of the German Treuhandanstalt that sold off East German enterprises in the 1990s,” Mr. Juncker thought that “Greece could gain more from privatizations than the €50 billion ($71 billion) it has estimated.”
European bankers have their eye on the sale as much as $400 billion of Greek assets – enough to pay off all the government debt. Failing payment, the ECB threatened not to accept Greek government bonds as collateral. This would prevent Greek banks from doing business, wrecking its financial system and paralyzing the economy. This threat was supposed to make privatization “democratically” approved – followed by breaking union power and lowering wages (“internal devaluation”). “Jan Kees de Jager, Dutch finance minister, has proposed that any more loans to Greece should come with collateral arrangements, in which European state lenders would take over Greek assets in the event of a sovereign default.”
And default will become pressing whenever the ECB may choose to pull the plug. It is inevitable, given the debt corner into which governments have recklessly deregulated the banks and cut property taxes and progressive income taxes.
The ECB makes governments unable to finance their spending by central banks of their own
Introduction of the euro in 1999 explicitly prevented the ECB or any national central bank from financing government deficits. This means that no nation has a central bank able to do what those of Britain and the United States were created to do: monetize credit to domestic banks and for public spending generally. The public sector has been made dependent on commercial banks and bondholders. This is a bonanza for them, rolling back three centuries of attempts to create a mixed economy financially and industrially, by privatizing the credit creation monopoly as well as capital investment in the infrastructure monopolies now being pushed onto the sales block for bidders – on credit, with the winner being the one who promises to pay out the most interest to bankers to absorb the access fees (“economic rent”) that can be extracted.
Politics is being financialized while economies are being privatized. The financial strategy is to remove economic planning from democratically elected representatives, centralizing it in the hands of financial managers. What Benito Mussolini called “corporatism” in the 1920s (to give it its polite name) is now being achieved by Europe’s large banks and financial institutions – ironically (but I suppose inevitably) under the euphemism of “free market economics.” It is the financial counterpart to Hayek’s Road to Serfdom – central planning by Wall Street, the City of London and Frankfurt, not Washington.
Language is adopting itself to reflect the economic and political transformation (surrender?) now underway. Central bank “independence” is euphemized as the “hallmark of democracy,” not the victory of oligarchy. The task of such rhetoric is to divert attention from the fact that the financial sector aims not to “free” markets, but to centralize control in the hands of financial managers. Their logic is to subject economies to austerity and even depression, sell off public land and enterprises, and reduce living standards in the face of a sharply increasing concentration of wealth at the top of the economic pyramid. The idea is to slash government employment, lowering public-sector salaries to lead private sector wages downward, while cutting back social services.
Latvia is cited as the model success story. Its government slashed employment and public sector wages fell by 30 percent in 2009-10. Private-sector wages followed the decline. This was applauded as a “success story” and “accepting reality” – despite accelerating emigration. So now, the government has put forth a “balanced budget amendment,” to go with its flat tax on labor (some 59 percent, with only a 1 percent tax on real estate). Former U.S. neoliberal presidential candidate Steve Forbes would find it an economic paradise.
The internal contradiction (as Marxists would say) is that the existing mass of interest-bearing debt must grow as it receives interest that is re-invested to earn yet more interest. This is the “magic” of compound interest. The problem is that its payment diverts revenue away from the circular flow between production and consumption. Say’s Law says that payments by producers (to employees and producers of capital goods) must be spent, in the aggregate, on buying the products that labor and tangible capital produce. Otherwise there is a market glut and business shrinks – with the financial sector’s network of debt claims bearing the brunt.
The financial overhead intrudes into this circular flow. Income spent to pay creditors is not spent on goods and services. It is re-invested in new loans, or on stocks and bonds (assets in the form of financial and property claims on the economy), or on “gambling” (“casino capitalism,” derivatives, the international carry trade – that is, exchange-rate and interest-rate arbitrage) and other financial claims that are independent of the production-and-consumption economy. So as financial assets accrue interest – bolstered by new credit creation on computer keyboards by commercial banks and central banks – the financial rake-off from the “real” economy increases.
The idea of paying debts regardless of social cost is backed by mathematical models as complex as those used by physicists designing atomic reactors. But they have a basic flaw simple enough for a grade-school math student to understand: They assume that economies can pay debts growing exponentially at a higher rate than production or exports are growing. Only by ignoring the ability to pay – by creating an economic surplus over break-even levels – can one believe that debt leveraging can produce enough financial “balance sheet” gains to pay banks, pension funds and other financial institutions that recycle their interest into new loans. Financial engineering is expected to usher in a postindustrial society that make money from money (or rather, from credit) via rising asset prices for real estate, stocks and bonds.
It all seems much easier than earning profit from tangible investment to produce and market goods and services, because banks can fuel asset-price inflation simply by creating credit electronically on their computer keyboards. Until 2008 many families throughout the world saw the price of their home rise by more than they earned in an entire year. This cut out the troublesome M-C-M’ cycle (using capital to produce commodities to sell at a profit), by M-M’ (buying real estate or assets already in place, or stocks and bonds already issued, and waiting for the central bank to inflate their prices by lowering interest rates and untaxing wealth so that high income investors can increase their demand for property and financial securities).
The problem is that credit is debt, and debt must be paid – with interest. And when an economy pays interest, less revenue is left over to spend on goods and services. So markets shrink, sales decline, profits fall, and there is less cash flow to pay interest and dividends. Unemployment spreads, rents fall, mortgage-holders default, and real estate is thrown onto the market at falling prices.
When asset prices crash, these debts remain in place. As the Bubble Economy turns into a nightmare, politicians are taking private (and often fraudulent) bank losses onto the public balance sheet. This is dividing European politics and even threatening to break up the Eurozone.
Breakup of the Eurozone?
Third World countries from the 1960s through 1990s were told to devalue in order to reduce labor’s purchasing power and hence imports of food, fuel and other consumer goods. But Eurozone members are locked into the euro. This leaves only the option of “internal devaluation” – lowering wage rates as an alternative to scaling back payments to creditors atop Europe’s economic pyramid.
So “saving the euro” is a euphemism for governments saving the financial class – and with it a debt dynamic that is nearing its end regardless of what they do. The aim is for euro-debts to Germany, the Netherlands, France and financial institutions (now joined by vulture funds) to preserve their value. (No haircuts for them). The price is to be paid by labor and industry.
Government authority is to lose most of all. Just as the public domain is to be carved up and sold to pay creditors, economic policy is being taken out of the hands of democratically elected representatives and placed in the hands of the ECB, European Commission and IMF. The latter is playing “good cop” for the time being, to the ECB’s “bad cop.” But all financial institutions are willing to see Spain’s unemployment rate rise to 20%, much as in the Baltics, with nearly twice as high an unemployment rate among recent school graduates. As William Nassau Senior is reported to have said when told that a million Irishmen had died in the potato famine: “It is not enough!”
How much austerity is “enough” – for more than the short run? “Helping Greece remain solvent” means, in practice, helping it avoid taxing wealth (“too rich to pay” is the new corollary to “too big to fail”) and roll back wages while obliging labor to pay more in taxes while the government (“taxpayers,” a.k.a. workers) sells off public land and enterprises to bail out foreign banks and bondholders while slashing its social spending, industrial subsidies and infrastructure investment.
One Greek friend in my age bracket has said that his private pension (from a computing company) was slashed by the government. And when his son went to collect his own unemployment check, it was cut in half on the ground that his parents allegedly had the money to support them. The price of the house they bought a few years ago has plunged. They tell me that they are no more eager to remain part of the Eurozone than the Icelandic voters showed themselves last month.
The strikes continue. Anger is rising. When incoming IMF head Christine Lagarde was French trade minister, she suggested that: “France had to revamp its labor code. Labor unions and fellow ministers balked, and Ms. Lagarde backtracked, saying she had expressed a personal opinion.” This opinion is about to become official policy – from the IMF that was acting as “good cop” to the ECB’s “bad cop.”
I suppose that all that really is needed is for people to understand just what dynamics are at work that make these attempts to pay in vain. Creditors know that the game is up. All they can do is take as much as they can, as long as they can, pay themselves bonuses that are “free” from recapture by public prosecutors, and run to their offshore banking centers.
*This article is an excerpt from Prof. Hudson’s upcoming book, “Debts that Can’t be Paid, Won’t Be,” to be published later this year.
by John Galt – April 10, 2011
This morning’s headline from the U.K. Guardian sent a message to the European Union that chills the spine of every central bankster:
The people have spoken and basically said the idea of creating large centralized unions that cause economic dependency are in violation of the beliefs of their nation’s sovereignty. Once the population of any country understands that their freedoms are surrendered to any central banking entity once they align themselves, either via treaty or legislation, then at some point they will react to repeal said legislation or treaty to restore their nation. Iceland’s economic cost will be great with the consortium of international financiers and corporations looking to punish the nation for their audacity. Yet in the end the nation of Iceland will become independent once again from the cartel of control which has damned many nations, including our own, to perpetual servitude.
While the vote in Iceland might send a shiver through the heart of Brussels and Berlin, the prospect of Ireland following through and engaging in the same rebellious act should prepare the United Kingdom and European Union for a nuclear winter. Because that vote, that rebellion, is building and as pressure is put on nations like Ireland and Spain to submit to the banksters, the reaction from these fiercely independent minded citizenry will insure they follow the same path of Iceland, guaranteeing the shattering of the ECB and union itself.
Iceland Sends a Shiver through the European Union
April 7, 2011 – ICELAND – A deep earthquake has occurred at Iceland’s Hofsjökull volcano. The volcano hasn’t erupted in recorded history and is said to have last had activity during the Holocene period according to geologists. The icecap in Hofsjökull volcano is deep. At its deepest point it is 650 meters deep at the most. The deepest points of the icecap are in the main caldera of Hofsjökull volcano. If Chaitén volcano in Chile has taught geologist anything, a dormant volcano doesn’t need a long time to go from dormant to an active eruption. That is why I find it worrying that deep earthquakes have started to appear in Hofsjökull volcano, even if they are extremely rare so far. Over the past ten years or so there has been a slight increase in earthquake activity in Hofsjökull volcano along with increase in hydrothermal activity.
In terms of Icelandic volcanoes, Hofsjökull volcano is more complex than most. South of it lies the Kerlingafjöll volcano. It is a volcano known for its heavy hydrothermal activity. Hofsjökull volcano lies along an east-west-trending area connecting the two principal rift zones of Iceland. It bridges the gap between the Reykjanes-Langjökull rift on the west, which terminates at Langjökull, and the eastern zone, which extends NE-ward across east-central Iceland. Besides being one of Iceland largest volcanoes, its location also makes it extremely dangerous. As it is located in the middle of Iceland, and a glacier flood from it could go many different ways down to the ocean and over large populated areas in Iceland. The deep earthquake is close to the caldera. The earthquake of concern under the Hofsjökull volcano took place at 10:11 UTC on 5. April 2011. That earthquake had a depth of 27.6 km. Its size was ML1.4, so it was a small earthquake. I do not believe that this depth is an error in the SIL system (though sometimes this occurs). A second earthquake took place at 10:13 UTC, its size was ML1.6 with the depth of 1.6 km. Whatever might be happening with Hofsjökull volcano; it’s worth watching even if it’s not going to erupt just yet. –
Status update: Mount Baekdu, a dormant volcano in North Korea, which hasn’t erupted since 1903 is showing increased signs of unrest, especially since the 9.0 Tōhoku earthquake and tsunami struck on March 11, 2011. In Japan, 19 dormant volcanoes are also showing signs of increased activity. Three volcanoes in the Philippines are reporting heightened activity and the Mt Ruapehu volcano in New Zealand is reported increased emissions of gases and rising temperatures in the volcanic Crater Lake. Three mud volcanoes in Azerbaijan have also erupted since the March 11 earthquake in Japan and quakes are stirring under Iceand’s network of ancient volcanoes. Either this is all one big coincidence or we’re moving into the next geological stage of this Earthchanges crisis. -The Extinction Protocol
by Jim Kunstler
Taking in Charles Ferguson’s excellent documentary, Inside Job, about the dark doings of Wall Street in our time, I confess I was awestruck all over again at the complete surrender of Obama to the very characters who embodied the corruption that rotted our system from the heart outward. Summers, Rubin, Geithner, and a host of other revolving door grifters who did everything possible to set up the implosion of banking, defeat the rule of law in money matters, and ruin millions who wanted nothing more than something useful to do in this society for a living wage.
Most impressive of all in this brave film were the shameless academic mandarins caught on camera trying to weasel out of their greed-driven misdeeds – Glenn Hubbard, chair of the Columbia University Econ department, a perfectly programmed polished WASP (like out of a “Ken” doll box) on the outside, slithering corruption inside, who played a major role in removing all restraints on Wall Street, then served as a director on the boards of several predatory financial giants, including the biggest, Black Rock, and pretended not to remember if he got paid for it; Martin Feldstein of the Harvard Econ department, in-and-out of government like a rat in a cheese-box, who sat on the board of AIG in the months before it blew itself up on credit default swaps, and who saw nothing about the company’s operations that gave off a bad odor after it entered the most massive government receivership the world has ever seen; and most memorably Fred Mishkin, former Federal Reserve governor, now an academic rover, who wrote a cheerleading report for the Icelandic banking system about five minutes before it collapsed, then changed the report’s title from Financial Stability in Iceland to Financial Instability in Iceland, then denied it on camera in the face of obvious evidence, then forgot whether he got paid six-figures to write the glowing report, then dissolved on camera into a maundering puddle of indignity and humiliation.
How do these rogues survive the disclosure of their turpitudes? Is there no one at places like Harvard and Columbia who has any sense of shame or even an inkling of disappointment that they employ such odious hustlers? Apparently not. This is a system with no mechanism of self-regulation left. And there’s Obama at the tippy-top of it serving like a department store mannequin with a Department of Justice that someone has hung a “gone fishin’” sign on. I voted for him in 2008, and I want to start a movement in whatever’s left of the Progressive core to get rid of him. Being a decent, presentable fellow with a nice family is just not enough. Even his vaunted speech-making abilities have gotten on my nerves. If I hear him say “make no mistake” one more time, someone will have to restrain me from kicking in the flat screen TV. Obama, it turns out, is the mistake.
Can’t any of us begin the reform of the Democratic Party, starting with resigning from being Wall Street’s bitch? Granted, the age of labor unions may be over for a while, maybe forever (who knows?), and the age of government money hand-outs on the grand scale to everybody-and-his-uncle, too. But how about just a party of intelligence and courage? Wouldn’t that be enough to start with? A party capable of setting some limits and enforcing them. A party able to understand the signals that the future is sending us about resource scarcity. A party willing to engage and defeat stupidity, such as climate change denial, and drill-drill-drill cretinism, and “creation science,” and all the pietistic hypocrisies of the Sunbelt know-nothings. A party willing to drag characters like Lloyd Blankfein into a court of law to answer straight-up fraud charges. A party willing to admit that if you can’t control both the terrain and the people’s behavior in Afghanistan, then there’s no excuse for prosecuting a war there.
I have a lot of hope for the millennials, the young people just coming up. They’re going to get sick of living in an ethical vacuum and sick of political paralysis.Their brains are going through the final stage of development where it arrives at the ability to make judgments. They are going to judge the Boomers and their X’er successors harshly and they’re going to remind us that Americans are capable of valiant action even without the trappings of jingoism and sports metaphors.
In the meantime, we can look forward to a year of spectacular unraveling. Our money system probably can’t survive the crack-up of revolving obligations that were ginned up so that bankers could cream off fortunes from every exchange of any sort of paper on the face of the earth. The European banks have nowhere to go anymore with Ireland and Portugal crapping out. Bond-holders are finally going to have to eat a lot of losses. Governments have fallen and more will go down – but, of course, more to the point is what governments will follow them in power? Probably more audacious ones, run by people who intend to act, perhaps even badly.
The Middle East and North Africa have the look of spinning into World War Three. The action just doesn’t seem like it’s going to simmer down anytime soon in a half-dozen nations that have started gunning down their own people – and there’s Iran sitting rather quietly on the sidelines, or so it appears for the moment, as the whole region rearranges itself to suit them better. Wait until Hezbollah starts lobbing missiles into Israel. You’ll see the big “tilt” sign light up the sky. Anyway you slice it there, America better get ready for a lot less imported oil. There’s really nothing we can do that will change that now, and drill-drill-drill will not come close to mitigating our losses, no matter how much Larry Kudlow wrings his hands.
Poor Obama. On The global chessboard of fate, he’s the powerless king facing down ranks of dark knights and implacable bishops. All he can do is sidestep their onslaughts. Even the pawns are beginning to moil and roister in the background. He’ll be on TV tonight. Make no mistake.
I was just informed this morning about the death of Joe Bageant, author of Deer Hunting With Jesus and the soon-to-be published Rainbow Pie. Joe was a brave and funny soul and we will miss him very much.
I have been following the story of Iceland on this blog for some time. Now an academic paper has emerged which tells in a better referenced form the story told by Gunnar Sigurdsson in his film Maybe I Should Have. It is a story of political corruption, as well as of greed, and of the co-option of regulators by politicians. It is, in microcosm, the story of the financial crises that have swamped Western democracies and left us facing economic depression and massive public-spending cuts.
The paper is by Robert H. Wade and Silla Sigurgeirsdottir and is published in the latest issue of the Post-Autistic Economics Review. Iceland is a classic case because it is so extreme: shortly before the crash the value of its banks was 11 times the size of its GDP. It was a huge financial pyramid standing on a tiny rock, and supported, unwittingly, by its 300,000 people.
Wade and Sigurgeirsdottir include some interesting details about how naive UK savers were sucked into filling the void left when the financial markets recognised the vulnerability of the Icelandic market and withdrew. The banks, Landsbanki and Glitnir, hoovered up the savings of UK investors who did not question the unfeasibly high interest rates and believed the words of the best-buy websites. When the banks went bust our government then repaid these savers for their risky behaviour, and has now sent the bill to Iceland.
There is corruption here as well as stupidity. Even after the collapse of Lehmans three UK local authorities invested £33 million in their Icesave accounts, ‘as though their expensively paid finance directors were fast asleep’ (p. 65). And as for corruption, following the rule that ‘the best way to Rob a bank is to own it’, in its last few months of life Landsbanki lent 36% of its capital to a few of its main owners, while Glitnir did the same with 17% of its capital. After years of avoiding the consequences of their actions, several Icelandic bankers are now facing prosecution.
The authors conclude:
‘Iceland is the story of Icarus in modern dress. Icarus sought to escape from exile in Crete using a pair of wings fashioned from feathers and wax. He was warned not to fly too close to the sun. But overcome by the excitement of flying, he flew too close, the wax melted, and he tumbled into the sea. As of early 2011 his Icelandic counterpart is still in the water, paddling hard but a long way from land, and the direction of the current is unclear.’
The same conclusion could be drawn for all the post-bubble economies, and of course it is important that we ‘learn the lessons of Iceland’ in terms of crony capitalism and financial instability. But for a green economist the most important lesson is the need to reconnect finance with the real economy. When finance runs out of control the consequence in unsustainability as well as instability. An economy in a steady state would return money to its proper role as a medium of exchange. As Mary Mellor argues, it is this sort of money we should be moving towards to support a sustainable, provisioning economy.
by Chris Greenwood
The Tchenguiz brothers seemed to come from nowhere and were identified with the boom years leading up to the banking crash. They were in deal after deal.
But yesterday it all came crashing down as they were arrested by investigators probing the collapse of the Icelandic bank Kaupthing.
The pair were held during simultaneous dawn raids in London and Reykjavik amid claims they withdrew vast sums of cash just days before the crisis broke.
Even as police knocked on their doors yesterday morning they were preparing to stage a champagne party on their super-yacht at a prestigious trade fair in the south of France.
The high-rolling businessmen – once ranked among the richest in Britain – were questioned over the collapse of the Icelandic bank in October 2008.
John Perkins has lived four lives: as an economic hit man (EHM); as the CEO of a successful alternative energy company, who was rewarded for not disclosing his EHM past; as an expert on indigenous cultures and shamanism, a teacher and writer who used this expertise to promote ecology and sustainability while continuing to honor his vow of silence about his life as an EHM; and as a writer who, in telling the real-life story about his extraordinary dealings as an EHM, has exposed the world of international intrigue and corruption that is turning the American republic into a global empire despised by increasing numbers of people around the planet. Then came September 11, 2001. The terrible events of that day convinced John to drop the veil of secrecy around his life as an EHM, to ignore the threats and bribes, and to write Confessions of an Economic Hit Man. He believed he had a responsibility to share his insider knowledge about the role the U.S. government, multinational “aid” organizations, and corporations have played in bringing the world to a place where such an event could occur. His newest book, Hoodwinked: An Economic Hit Man Reveals Why the World Financial Markets IMPLODED-and What We Need to Do to Remake Them. Previous books by John Perkins include The Secret History of the American Empire, Shapeshifting, The World Is As You Dream It, Psychonavigation, The Stress-Free Habit, and Spirit of the Shuar. John Says: “We have entered one of the most important periods in human history, the Time of Prophecies. We have the opportunity to lift ourselves to new levels of consciousness. This time was foretold over the past centuries by cultures around the world. Now it is up to us -you and me- to make it happen.” In this interview, John shares his insider information regarding the current state of the world. Topics Discussed: Hoodwinked, economic problems in the world, Iceland, Ireland, corporate structures, corporate globalization, politics, oil, resources, Milton Friedman, usury, debt, public/private partnership, Goldman Sachs, Repeal of the Glass-Steagall Act 1999, regulation, consciousness, change, conspiracy, NSA, healthcare system, Egypt, The World Bank, China, nepotism, mortgages, IMF and more.