Icelandic Revolution - the people say NO to the Banksters

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Icelandic Revolution - the people say NO to the Banksters

Iceland appears to be setting a new standard of taxpayer response that politicians everywhere might want to note.

Under pressure from voters and taxpayers, Iceland's President, Olafur Ragnar Grimsson, this week refused to sign a bill to reimburse almost $6-billion to Britain and Holland for money paid to depositors who put money into two high-flying Icelandic banks that failed in 2008. The president was responding to taxpayers who are essentially rebelling against being forced to pick up the tab for a financial bailout of depositors, regulators, foreign governments and even their own government and politicians. It is only a bit of an exaggeration to say that the people of Iceland are refusing to pay for all the schemes of private bankers and public officials who, over the course of the last decade, drove the whole of Iceland into bankruptcy

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I was listening to this on the news this morning and cheering.  Good for them!  The bankers got themselves into the mess - we shouldn't be bailing them out!


Icelandic government is warning Britain to watch their mouths over the dispute, or it could piss off the people who will be voting in a referendum on February 20th about the terms of the repayment.


It's not a bailout that's being demanded. It's compensation for depositors that thought their money was safe.

[quote]Offering rates of up to 6%, within five months Icesave accounts attracted $10-billion in British deposits from 300,000 people -- equal to the entire population of Iceland. These deposits were marketed as if they carried deposit insurance from Iceland. Another Iceland bank also raised money using the same technique.[/quote]


[quote]When the banks collapsed, however, there was no deposit insurance available. Deposit insurance is normally structured to cover the failure of some institutions by taking pooled money from the surviving institutions. But in a systemic failure, when all banks our essentially out of business, who pays the depositors?[/quote]


Is it the responsibility of the government to step up and cover the deposit insurance if banks fail, perhaps not. Then again a lot of ordinary citizens are going to end up with their savings destroyed because they went to the bank that was offering them the best interest rate. However, this is made more complicated by the international nature of what happened. Considering the scale of foreign deposits it could create an unmanageable burden for Iceland.

Credible deposit insurance is key to credible banking, depending on how Iceland handles this they risk becoming an international pariah in financial services.

Snert Snert's picture

[quote]But there must surely come a time in the affairs of a nation when the people have a right to rise up against bumbling politicians, incompetent regulators, private scammers and international agencies who appear to be part of the problem.[/quote]


I guess that time wasn't, say, 15 months ago when everyone was enjoying the prosperity. I wonder how many Icelandic unions put their pension funds under the mattress, rather than playing fast and loose with this irresponsible financial tomfoolery we call "investment" in exchange for the free money? At any rate, I guess they're safe.


I think the point is that the average Icelandic citizen is as much a victim as the investors in Britain were, and they've all been screwed over by the bankers.

Perhaps the unions did invest, thinking their pension money was safe.  If so, they've lost everything.  They weren't the ones gaming the system, however, so why should they lose everything AND be forced to pay for everyone else in other countries who got defrauded by the same people who defrauded them?


I mean, do you have RRSPs?  I did, for a while.  I actually cashed them out due to a family crisis just before the markets started falling, but if that family thing hadn't happened, I'd have lost big time too.

That doesn't make me responsible for the financial crisis, though, just because I was investing for my retirement.  I mean, what the heck else are we supposed to do about our retirements besides invest in the vehicles that are there for us, and which we trust the governments to regulate?


For the moment I'm pretty undecided as to who should take the hit for this mess.  However, framing what's happening as some sort of victory over the banks it rather misleading.  The bankers that engineered this mess have areadly been paid and made good money even though some may have now lost their jobs.  The banks are either in government ownership or being liquidated to pay their liabilities.  The corporations that did this are effectively gone and the people responsible aren't going to be held accountable.

This is now a debate between governments as to who foots the bill for the clean up, it's going to be one tax payer or another so I'm not really sure what there is to cheer about.

Le T Le T's picture

The people who run the bank should have to pay back every cent. And since they don't have likely have $10 billion on hand (which seems like a lot for only 300 000 clients, btw) they should go into debt for the money. That debt will be passed on to their children, their children's children, etc. and they will finally learn how the other half lives.


It's an average of $33 333 per person.  High but not obscenely so.

Snert Snert's picture

[quote]I mean, do you have RRSPs? [/quote]


No, though my pension contributions, and my employer's matching contributions, are surely invested in something. And that's kind of why I find it funny when (especially after the financial meltdown a year or so ago) investment is characterized as some kind of Three Card Monte scam that dishonestly manufactures wealth out of other wealth and rips off the little guy. The little guy never seems to complain about it when it's his pension that's growing, or when it's him that gets a mortgage that will allow him to buy the house that he wants to buy. Nobody seems to think that the world of finance and investment is a huge Ponzi scheme when it contributes significantly to the GDP. Iceland was quite famous for transitioning from a fishing and sealing economy to a financial powerhouse, and I don't recall hearing all the Icelanders demanding to go back to the herring boats. Similarly, I haven't heard many Americans complaining that that house they bought was forced on them when all they really wanted was to rent forever.


I think what is appalling is the total lack of regret by those on the right in Iceland who implemented Milton Friedman's whacky neoliberal agenda since the 1990's. Some of them are even suggesting that they didn't go far enough with the voodoo.



Mr. Grimsson stressed that Iceland will repay both London and the Hague the funds they used to compensate their citizens who had accounts with online bank Icesave, a subsidiary of Icelandic bank Landsbanki that was available only in Britain and the Netherlands.

Next month's referendum on the so-called Icesave bill is a vote on the changed terms of the deal imposed by Britain and the Netherlands, not the deal itself.

If a "no" vote wins the day, earlier legislation will still stand, paving the way for further talks between the three countries to reach a mutually acceptable deal.


So they will still get paid, regardless of the referendum. It means they will just negoatiate the same changes in a different wording and it will pas. The deal is a done deal and cannot be changed. This is just on the changes proposed for the deal

Le T Le T's picture

[quote]It's an average of $33 333 per person. High but not obscenely so.[/quote]


That just struck me as pretty high for bank account deposits. But then, I'm pretty broke.

Frustrated Mess Frustrated Mess's picture

MAKE THE FUCKING RICH PAY! They lobbied for low regulation, they turned banks into casinos and pyramid schemes, and they have been the net beneficiaries if the bailouts and so-called stimulus schemes. Make them pay. And it's really, really easy. The method is a one syllable word: tax.


Iceland promises to pay no matter what



Catchfire Catchfire's picture

Why Iceland Should Be in the News, But Is Not

[quote]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.[/quote]

epaulo13 epaulo13's picture

..txs catchfire. i'm reposting this blog. it's a great piece as well worth a second read.
Democracy 2.0: Iceland crowdsources new constitution

by Jérôme E. Roos on June 11, 2011

In just three years, Iceland went from collapse to revolution and back to growth. What can Spain and Greece learn from the Icelandic experience and its embrace of direct democracy?


laine lowe laine lowe's picture

More people need to hear about Iceland. I find it inspirational. Hell, if things get worse around here, I'll try to find a way to live there. It's not like I'm not used to cold weather. Smile


laine lowe, it's actually not that cold there.  The temperatures are quite moderate due to natural geothermal heating.  When rr and I went there for our honeymoon in June, the weather was quite nice - it was around 13-20 C.  (And I think it gets a little warmer than that in July, if I'm not mistaken.)  And we were told that in the winter, it doesn't generally get colder than -10 C.

A really interesting English language publication to read regularly is the Reykjavik Grapevine.  It's a newspaper that gets published once or twice a week (I think, at least during the summer anyhow), and it's politically progressive.  It's a good way to keep up with not only political news there, but also cultural stuff as well.



Yes, thanks to Catchfire. Now there is a real information service!

[quote=SACSIS]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." (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)[/quote]

You and me both, Deena. ;-)


Thanks, Michelle. I know very little about Iceland. 

[quote=In June, Michael Hudson]The most effective tactic is to demand a national referendum on whether to accept the ECB's terms for austerity, tax increases, public spending cutbacks and selloffs. This is how Iceland's President stopped his country's Social Democratic leadership from committing the economy to ruinous (and legally unnecessary) payments to Gordon Brown's Labour Party demands and those of the Dutch for the Icesave and even the Kaupthing bailouts.

The only legal basis for demanding payment of the EU's bailout of French and German banks - and U.S. Treasury Secretary Tim Geithner's demand that debts be sacrosanct, not the lives of citizens - is public acceptance and acquiescence in such policy. Otherwise the imposition of debt may be treated simply as an act of financial warfare.

National economies have the right to defend themselves against such aggression. The crowd's leaders can insist that in the absence of a referendum, they intend to elect a political slate committed to outright debt annulment. Across the board, including the Greek banks as well as foreign banks, the IMF and EU central planners. International law prohibits nations from treating their own nationals differently from foreigners, so all debts in specified categories would have to be annulled to create a Clean Slate. (The German Monetary Reform of 1947 imposed by the Allied Powers was the most successful Clean Slate in modern times. Freeing the German economy from debt, it became the basis of that nation's economic miracle.)[/quote]

Countries have a right to defend themselves against marauding international capital.

It is ILLEGAL for any nation to treat foreign nationals differently than its own citizens.

Clean slates, and not oppressive debt claims imposed illegally by international banksters, leads to prosperity. POst-WW II Germany is a good example of this. And alternatively, Post WW I Germany is a very bad example of banksters imposing oppressive debt levels with criminal interest rates on a nation of workers who did not share in profit windfalls had by industrialists who took advantage of immoral warfiteering.

[quote=Michael Hudson]My friend David Kelley likes to cite Molly Ivins' quip: "It's hard to convince people that you are killing them for their own good." [/quote]

No kidding! And to paraphrase Hudson: International banksters' trillion dollar gambling debts that can not be repaid, won't be. And they know their impossible gambling debts will never be repaid. It's a ruse to get countries to handover valuable state assets and moneymakers to an international oligarchy at firesale prices.


By the way, that article posted by Catchfire above, written by Deena Stryker, may be inspiring, but apparently it's completely riddled with factual errors - just about every claim in it is either exaggerated or incorrect.  So you might want to read this correction from the Grapevine.  They correct it somewhat reluctantly, since they'd like Iceland to be the folk heroes that those of us outsiders on the left want them to be!

Credit to radiorahim, who noticed this article and passed it along to me.


Thanks Michelle and Radiorahim.

[quote=the grapevine] We are fans of yours, but we are sad to say that your tweet and the article it cites are both dead wrong. #Iceland"[/quote]

One thing, I wonder who "we" are out there in the tweetosphere? I'll read some more...



The Grapevine editors, I would assume, with the actual article written by Anna Andersen.  And they were addressing Naomi Klein, who also tweeted the article Catchfire posted above, I think.  Notice all the Icelanders in the comments after the article who were congratulating the editors for setting the record straight.


I'm slightly but not entirely confused by this:

[quote=Anna Andersen]There are two errors there. One is obvious. Namely, Iceland is not a member of the European Union. [/quote]

And AA is right. Iceland is not an EU member country.

Iceland is a candidate nation for membership in the EU. They were already heavily integrated into the European common market before their application for membership was submitted sometime in June.

[quote=Anna Andersen]The other one is perhaps less obvious, but it is nonetheless an important point. That is, Iceland did not go bankrupt. This factual error was heavily criticised in 2008 when Iceland's banks collapsed and news spread that Iceland, the country, had gone bankrupt. This is as wrong today as it was then. [/quote]

I'm guessing that she is saying Icelandic government did not default on debts that it does not legally owe to British or Dutch banks? Is that what AA is saying?

And then there is this from the NYTimes:

[quote=NYTimes, 10/2008] "Iceland is bankrupt," said Arsaell Valfells, a professor at the University of Iceland.[/quote]

I think Valfells may be confusing the issue. How can Iceland declare bankruptcy for what are Icelandic banks gambling debts owed to British and Dutch banks? It makes no sense.


[quote=Anna Andersen]Then there's this statement: "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."

These numbers are wildly inaccurate (and not to be too pedantic here, but sticking to a multiplier or percent would be helpful when making such a comparison). To set this straight, Iceland's debt (as in The Central Bank) was equal to 57% of the GDP in 2003 and fell to 43% of the GDP in 2007, according to World Bank statistics. In 2009, that percentage reached 104%.[/quote]

[quote=Michael Hudson, economist]The main problem with Iceland's obligation to Britain and the Netherlands is that foreign debt should not be paid out of GDP (unless you want to force down the exchange rate). Apart from what is recovered from Landsbanki (now with the help of Britain's Serious Fraud Office), the money must be paid in exports. But there has been no negotiation with Britain and Holland over just what Icelandic goods and services these countries would be willing to take in payment[/quote]

[quote=Michael Hudson, economist]So the Icesave problem will now go to the courts. The relevant EU directive states that "that the cost of financing such schemes must be borne, in principle, by credit institutions themselves." As priority claimants Britain and the Netherlands will indeed get the lion's share of what is left from the Landsbanki corpse. That was not the issue before Iceland's voters. They simply aimed at saving Iceland from an open-ended obligation to take the bank's losses onto the public balance sheet without a clear plan of just how Iceland is to get the money to pay.[/quote]

Apparently Icelanders had a referendum on whether or not they would take Iceland's private bank debts on to the public's balance sheets as public debt owed to foreign creditors. But as Keynes said, foreign debts should be paid out of exports, goods and services, but not GDP. Paying from GDP has an effect of lowering the exchange rate/purchasing power of the national currency and thereby raising the foreign debt to GDP ratio, which at some point becomes unsustainable and unrealistic for a nation to take on.

They need to wipe debt slates clean in all those countries. Clean slates and not oppressive debt levels lead to economic prosperity. Post WW II Germany is a good example. 2000s Argentina is another. As Hudson and others say, debts that can not be repaid won't be.

radiorahim radiorahim's picture

Fidel, the Reykjavik Grapevine is probably the best regular English language source of news about Iceland.  It's an "alternative" paper that tends to be on the left and also carries a lot of arts, culture and tourism articles.

They publish monthly most of the year, and it seems every couple of weeks in the summer months.   They also archive their back issues in .pdf format.   If I recall correctly there are two or three years of back issues on the site.



Furthermore, while Iceland may seem like a symbol of sticking it to the financial institutions that brought about the financial collapse, the people really haven’t escaped the burden. To quote respected political commentator Egill Helgason in an article that will print in The Grapevine on Friday: “According to an OECD report Iceland has put more money into its failed financial institutions than any other country except Ireland. So in this way Iceland is not a model—the people in Spain need not wave Icelandic flags.”

Apparently the author was confused about whether or not we had a new Constitution when she started writing and then did some more research toward the end to realise that yes, it is still a draft with a number of hoops to go through. 

The idea that the Constitution was ‘crowdsourced’, as the international media has been keen on reporting, is at best half true. But accepting suggestions via Facebook and an Internet submission form is hardly the same as the Constitution being “written on the internet”. It sounds cool though.

Excellant article, very tongue in cheek criticism of the klein article



IMF Leaving Iceland


Looks like the IMF got one right.

"RÚV reports that the IMF conducted its sixth review of the Icelandic economy in Washington this afternoon, and came to the conclusion that they were no longer needed. The IMF will therefore be concluding operations in Iceland, and leaving."



Furthermore, while Iceland may seem like a symbol of sticking it to the financial institutions that brought about the financial collapse, the people really haven’t escaped the burden. To quote respected political commentator Egill Helgason in an article that will print in The Grapevine on Friday: “According to an OECD report Iceland has put more money into its failed financial institutions than any other country except Ireland. So in this way Iceland is not a model—the people in Spain need not wave Icelandic flags.”[/quote]

Icelanders voted overwhelmingly in a referendum not to accept the original terms of the payout to European banks. The case is before an EU court representing a trading block of nations which  Iceland does not belong to, at least not yet anyway. Does the EU court have jurisdiction over New Zealand? Because like Iceland, NZ is not part of the EU either. I think the result of Iceland's referendum has more weight than any debt repayment obligations to the EU might claim against a non-member nation. The referendum results make those original debt claims of all Icelanders appear to be illegal, and EU bankers and their shareholders know it.

It remains to be determined how Iceland will pay a debt to the EU banks and what terms.  I think the original demands made by British and Dutch banks are out the window for now though. And if Iceland's economy does sink deeply into recession, Icelanders surely won't be paying debts which in coming years could be determined to be neither realistic nor legal debt claims against them. Every country has the right to defend itself from marauding capital. It's also illegal for any country to treat foreigners differently than its own citizens. EU bankers would have preferred there was no referendum. Neoliberalism is inherently undemocratic, and they want to avoid national referenda on these kinds of fictitious debt obligations altogether.

[quote=Michael Hudson]So the Icesave problem will now go to the courts. The relevant EU directive states that "that the cost of financing such schemes must be borne, in principle, by credit institutions themselves."[/quote]

Iceland's social democrats screwed-up by agreeing to a referendum in the first place. Not very neoliberal of them at all. EU banksters are angry with them and ratings agencies threatening to downgrade Iceland's credit rating. Icelanders still could mutiny off the neoliberal Titanic ship of doom, and the banksters know it. It's what they fear most with one country possibly starting a mutiny. Iceland would be better off without abiding by neoliberal monetary diktats emanating from the EU and so would a lot of countries. Look at Latvia.

radiorahim radiorahim's picture

From "Iceland's Zombie Politics" by Egill Helgason in the Grapevine:

[quote]The situation almost three years after the crash of 2008 is thus: Much of the debts of the Icelandic banks were written off, there was no other choice, as the total debt was ten times the GDP. There was no other way out—this was not due to any wisdom on part of the nation’s leaders. The bank system has been resurrected, mainly on the back of the population—it is the common people who carry the load. There has been a huge transfer of wealth from the general public to the banks, the pension funds and the owners of capital. According to the latest figures, lending institutions used to own a stake in 30 percent of the private housing in the early 2000s—now they own more than 50 percent.[/quote]

Read the rest here


[quote=Egill Helgason]t seems clear that if the government were to fall, the application would be withdrawn.

Politics in Iceland are in disarray.[/quote]

He seems worried about the currency. No one in my neighborhood in Northern Ontario who I know personally ever worries about the value of the loonie. It's outside our little circle of control as working class slobs that we are.

The capitalist world is in economic depression. Icelandic politics are not the only politics in disarray. As a socialist, I don't think politics are in disarray. This is the natural outcome of a system that never worked well in the first place.

Our corrupt stooges in Ottawa are hanging on to phony majority power by their fingernails, and they know it. Political conservatives and their supporters are standing on the train tracks as we all are. And the light that they think they see at the end of the tunnel is really an oncoming train.

radiorahim radiorahim's picture

Workers around the world do indeed care about the value of whatever currency is being used.

If the currency spikes high, then it may mean that you lose your job because the products your country produces become very expensive.

If it drops in a major way...or becomes worthless it might mean that you can't afford to buy anything or your life savings are wiped out overnight.


Okay but people invested in the currency worry more than you or I do. I don't think every Icelander has a personal fortune invested in the Krona. All of those people will not be nearly as worried about the Krona as the select few Icelanders and foreigners who do. If someone sends me a bill for $1 million dollars which I had no part in spending, I can't worry about it. Why? For one thing, that creditor will not be extracting blood from a stone or performing any kind of miracle with my wallet full of bills. Andwhat's in my savings account isn't enough to begin to pay that kind of a tab. He can sue me all he wants, but it's not worth it for him to do so. At some point he will have to realize that I just won't be paying.

I am not saying Helgason is one of those people who worry more than average. Let the currency drop, and let fictitious debt compound interest and total debts owed soar beyond the bankers wildest dreams. Because inflated debts that can not be repaid won't be.  The debt claims against Icelanders are not legally binding and why they are pretending to negotiate repayment deal in a EU court. Icelanders votes carry more weight in Iceland than a court decision based in some other country representing the interests of rich bankers and investors in another country altogether as far as I can tell. Icelanders just don't have the British pounds or Euros originally demanded from them. How can they pay and in what currency or currencies which they do not have enough of to cover imports and fictitious debt claims? And apparently ALL Icelanders are worried to a frazzle about the value of the domestic currency. I would not worry all that much if I was an average Icelander, because all I can possibly do about the situation is to continue going to work in order to pay my personal bills and taxes as usual. The whole thing is entirely out of my hands except for one day every four years or so and any national referenda days that happen out of the blue.

What Hudson is saying is that any indebted country's attempt to rely on neoliberal financial engineering to get them out of the mess they are in will end badly. The light at the end of the tunnel is not what conservatives believe it is. There will be no real western world economic recovery until debt slates are wiped clean, or when a new financial deal is made between nations that frees them of impossible to pay debt claims. 



Workers around the world do indeed care about the value of whatever currency is being used.

If the currency spikes high, then it may mean that you lose your job because the products your country produces become very expensive.

If it drops in a major way...or becomes worthless it might mean that you can't afford to buy anything or your life savings are wiped out overnight.


Well overall I think you're right. I've re-read the Grapevine article and agree with the author. Iceland is not a model for the world. Corruption in government is surely the problem. 

Icelanders should still vote no to it all. 

epaulo13 epaulo13's picture

Northern Lights

Film Description:

Northern Lights is the first feature-length documentary to be produced for Dazed TV and features interviews with Icelandic bands such as Agent Fresco, Seabear and Mamut, cutting-edge designers and artists such as Mundi Vondi and Eygló Margrét Lárusdóttir and young filmmakers such as Kristín Bára Haraldsdóttir and Hrefna Hagelin. There is also comment from some more established figures, such as the internationally celebrated contemporary artist Ragnar Kjartansson, the acclaimed music producer Valgeir Sigurðsson (who has produced many of Björk’s albums), and the highly-respected film director Hilmar Oddssonn, among many others. What we wanted to find out from them was how people in Iceland have been pulling together against the odds to create the possibility of a future with a groundbreaking new political paradigm – one full of hope, optimism and creativity.