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View Diary: Iceland Solves Banking Crisis by Indicting Bankers, Forcing Mortgage Relief (191 comments)

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  •  Some caveats (2+ / 0-)
    Recommended by:
    BluePlatypus, Woody

    First, let me say that I do approve on how Iceland has dealt with things compared to other countries, but there's a lot of unpleasant details people like to gloss over.

    Iceland took an almost 100% inflationary hit doing this, which essentially halved everyone's income and savings.  

    The diarist mentions their bonds are yielding at 4.77%... but those are dollar denominated bonds.  The inflation risk for investors is minimal due to that.  Also, Iceland is small enough it can reasonably be bailed out by the IMF.

    ...and none of this has solved their legal issues with Icesave, as foreign creditors don't appear to be too happy with being stiffed.

    •  Why is the world's economy so (3+ / 0-)
      Recommended by:
      Evolutionary, Linda Wood, elwior

      dependent on "foreign creditors."  Whose world is it, anyway?

      Greed's self-regulation is collapse. So is delusion's.

      by Publius2008 on Fri Feb 24, 2012 at 07:34:45 AM PST

      [ Parent ]

      •  In this case, it's taxpayers.. (6+ / 0-)

        The British, Dutch and other governments ended up guaranteeing deposits made to these Icelandic banks. The Icelandic government only covered domestic deposits.

        The money's gone. The banks are gone. So the question is who should pay:

        1) The ordinary British granny who put her savings in an Icesave account (this isn't an exaggeration; many if not most of the customers here were retirees)

        2) The British/Dutch/etc taxpayer, who ended up guaranteeing that deposit. (actually not all of them did)

        3) The Icelandic taxpayer, because it was 'their' bank. Even if most Icelanders had nothing to do with it. On the other hand, all Icelanders were in fact benefiting from the influx of foreign cash while the going was good.

        Ultimately, all these options is unfair to somebody. There's no simple solution. It's easy to rail against a faceless group of "foreign creditors". But when you put a face on it, such as this lady, it's not so easy. Saying "screw the creditors!" is one thing, saying "screw you!" to an old lady who's life savings are at stake is something else.

        •  Internet banking (0+ / 0-)

          Weren't many of these off-shore depositors lured into doing their banking over the Internet, where a bank headquartered in Iceland didn't seem so much farther away than one in, say, Edinburgh.

    •  Correct me if I'm wrong (1+ / 0-)
      Recommended by:

      But I think they have made a lot of progress on the Icesave front, which contributed to Fitch's willingness to upgrade their debt.

      There was a diarist moving to Iceland, and he pointed out that Iceland ultimately agreed to a compensation package for foreigners on the second or third try. So foreign Icesave depositors were stiffed initially, but that is now resolved or near resolution.

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