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Iceland, the Mouse that Roared

Szandor Blestman

I thought I heard something the other night. It was a distant sound, a low rumbling, a roar from some far off beast that had finally pronounced its presence. It woke me for a second, but it was so distant I felt no threat and simply rolled over and went back to sleep. The next morning I learned that Iceland was taking a stand. It was refusing to pay its British and Dutch debts. It is claiming the debts are a result of fraud, and it’s right. They have made the offer to pay some years from now, if they can afford it at that time, and only as a percentage of their GDP. This offer has been, of course, declined by Iceland’s creditor banks as they demand payment in the form of real assets.

The Icelanders have grown a pair, so to speak. They are doing something I wish Americans would have done, or will do in the future. They are standing up to the privately owned banks that seem to think they are above the law, that they can change the rules at their whim, and that they alone know what’s best for the world, which of course happens to empower them and help their profits. I may not agree with all the politics of Iceland. It might not be the bastion of freedom one looking to get away from intrusive government might run to, but I do admire their stance against the banksters.

Let’s examine the situation a little closer. The Icelanders claim that private banks owe the money to other private banks, not taxpayers. The people who own the private banks should be responsible for paying back the creditor banks, not the people of Iceland. I agree wholeheartedly with that assessment. Furthermore, I would take it a step further and make the assertion that any government official voting for any public borrowing that requires payment of public funds for interest be held responsible, or their family be held responsible, should the loans go into default. In other words, these public officials should not be allowed to maintain their fortunes while the common folk are expected to pay for the mistakes they made. Perhaps that would help stop the corruption.

It seems that Iceland was fooled into the same ponzi scheme the rest of the world finds itself in. This all revolves around the fact that money in and of itself has no intrinsic value. It is just paper, for the most part, and in the modern world it is just data floating around in cyberspace. Even metal coins are made from cheap and common metals anymore. The fiat system devised by the central banks are designed to collapse at some point, and it’s designed to collapse in such a way that the very few, very rich, very powerful end up with all the marbles. It’s not enough to them, it seems, to be at the top of the heap, they have to be so high up and keep the common folk down so low as to be untouchable.

Those that own the banks now hope that they can swoop in and buy up the nation’s infrastructure for pennies on the dollar, or in this case aurar on the krona. This is how they operate. They print money based on nothing but debt at negligible cost to themselves, then charge interest on that debt, interest that is never created by the way, and then when the debt can’t be repaid they end up acquiring all the real wealth that’s been created. It’s a brilliant scheme in its simplicity. They end up with all the real wealth and they risk nothing of any real value. I could be wrong, but I think it’s safe to say that the Icelanders figured this out when their creditor banks started demanding things like their geothermal power stations and other such publicly owned infrastructure as payment for their defaulted loans. They cried “foul!” – as well they should having played by the rules all this time – and charged that they had been defrauded. They may well have shocked the establishment with their refusal to pay the extortion.

One may well ask, “Is this the fate that awaits all nations?” How many nations in the world today are in the same boat as Iceland? How many are having problems just servicing the interest on their debt? I dare say it would be easier to count the nations that weren’t experiencing debt trouble. And one could rightly ask where all the money has gone. Certainly the debt hasn’t been put back into the economy to create more wealth. Indeed, I would venture a guess that there’s trillions of dollars, euros, yens, pounds, francs, marks, you name it, stashed away in vaults somewhere just waiting for the day when they can be used again, money that should no longer exist that somehow found its way into secret vaults that also shouldn’t exist.

It is interesting to note that the biggest banks, the ones that managed to get bailed out by US tax dollars rather than made to liquidate, are intimately connected to the same international bankers who own the central banks across the globe. Indeed, Goldman Sachs seems to have become a “bank of the world,” so to speak, as it has its fingers in a little bit of everyone’s pies these days. It is also interesting to note that their largest competitors were allowed to fail, effectively setting them up with monopoly privileges. That’s how the power banking elite want it, all the money in their hands and all the corporations under their thumb as they monopolize the issuance of currency and credit. Everyone will have to do as they say or they will quickly become bankrupt and destitute. Such is the power of monopoly.

One may well wonder what happens next. The British and Dutch have threatened economic sanctions should the Icelanders fail to fall in line, but is this how we want to treat our brethren? Is this how we want to treat our allies that stood by us in the darkest of times? Do we now just shun people we consider friends simply because they stand up for what they believe is right? Do we go so far as to commit an act of war on such a democratic nation because they recognize a fraud when they see one? This situation should get everyone thinking. The corruption now exposed is so grievous and obvious that we should all realize the time has come to obliterate the current system and deny any power to those who brought this situation to bear.

It is once again time to set up a system of money based on labor instead of debt. We should have a system where free people are able to own property outright, not have to borrow to afford it and then worry that an uncaring bank may come and claim it should one find one´s self in financial trouble. Similarly, it is very disturbing that government can claim private property via eminent domain and non payment of property taxes as if they feel they already own the land you pay for. These wrongs have needed correction for a long time now and hopefully the actions of the Icelanders will help start the ball rolling.

While the Greeks are rioting because they worry their entitlements will be taken away, the Icelanders have been able to take a more direct roll in the political process. The Greeks may well feel they have been left out of the political process, much like many Americans feel at this point in time as we watch the congress blatantly ignore the wishes of the common folk time and again. The bailouts, the wars, the passing of laws violating our rights and the health care bills are all examples of the minority political class ignoring the wishes of the majority to the detriment of society. The Icelanders may have to pay a price for their bravery, but they are finding their way back to freedom and self reliance.

We have been dependent on these banks for far too long and they have taken advantage of it. They have threatened our lawmakers with martial law and economic destruction. They have refused to honor the will of the people and answer questions involving how they´ve spent our money. As I write this, a very few senators, Bob Corker (R-TN), Richard Shelby (R-AL), Chris Dodd (D-CT) and Judd Gregg (R-NH), are working to strip the Audit the Fed amendment from the Financial Reform Bill and give the Federal Reserve even more power. This will assure they will never be held accountable for the wrongs they have done. These senators need to be shown in no uncertain terms that we the people have had enough and will not obey their dictates and whims any longer.

We as a society need to start producing again. We need to start competing with others who wish to produce. This is how wealth is created. The more wealth we create, the more prosperous we all become. For a few decades now, we have tried to maintain our lifestyles with a service economy. It didn´t work. Now the economy is collapsing worldwide. Now the banks are hoarding that which they created and are trying to claim the real wealth that should be owned by private sovereigns. We need to ask ourselves, can we be proactive and stop this before we wake up and find ourselves in the same boat as Iceland? If not, will we simply say no and refuse to pay as they did, or will we allow our society to break down and resort to violence as the Greeks? Don´t let a few politicians on the bankster´s payroll dictate what needs to be done. Demand action now. Roar louder than the Icelanders. Hopefully, we will find justice later. Hopefully, we can avoid the fate of nations that remain on the central banker´s preferred course.

Szandor Blestman was born the 6th of 8 children to a high school English teacher and a certified financial planner. He attended the University of Illinois and earned a Bachelor’s degree in Rhetoric in 1984 with minors in Math and Geology. He took some time off school to raise a family. He has five wonderful children, three of which have grown to adulthood. He achieved a Master’s of Science in IT from the University of Maryland University College in Dec. 2004. Szandor has been laid off from work since January and is looking for employment. If you know of or have any job openings, particularly in writing, editing, acting or media production, please contact him at sblestman@yahoo.com. Also contact him if you are a publisher and wish to offer him a contract for the work he has already done. He will relocate for the right opportunity. Szandor loves receiving email and feedback.

Hint To Other Nations: Here’s The Bill

Posted by Karl Denninger

For your coddling of the banker cabal, that is.

Yes, that’s my view.  This sort of bluster and bullshit must not stand:

Dutch Finance Minister Wouter Bos would not be drawn into speculation on steps against Iceland. “But this can’t go on forever. We want our money back. We negotiated reasonably.”

Mr. Bos, go perform an indecent act on yourself.

You, along with the rest of the “western world”, were complicit in and willing partners with the criminal banking cabal that ripped off the entire world with their worthless securities.

You “negotiated” for the right to steal even more after you failed to lock up the banksters for their criminal conduct – for intentional concealment and fraud in their “marketing” of these securities to investors worldwide.

You, just as with those here in Washington DC, were fully complicit in the looting of the public that took place over the last decade and more.

YOUR GOVERNMENT has allowed institutions in your nation (and elsewhere) to claim that “debt is output” and that speculation constitutes GDP.  That’s a willful, knowing lie.

Britain is also weighing in with the following threat:

Myners (the British Financial Services Minister) told the BBC that if Iceland voted against the deal, it would cut itself off from the global financial system and from International Monetary Fund aid for its economy, one of the worst hit by the world bank crisis.

‘The Icelandic people, if they were to reach that conclusion, would effectively be saying that Iceland does not want to be part of the international financial system, that Iceland doesn’t want to have access to multi-national, national and bilateral funding and doesn’t want to be regarded as a safe counter-party with whom to do business,’ Myners said.

Mr. Myners, with all due respect (that is, none), may you be fornicated by a stallion.

“The City” has for literal hundreds of years been the hotbed of bankster corruption, greed and fraud.  Your nation is on record (in The Congressional Record no less!) as having sent bankster “representatives” over to this country shortly after it was formed for the explicit purpose of bribing our Congress into being recaptured after you lost the Revolutionary War!

I, for one, am tired of this game of “captured government” and it appears so is Iceland and its people.

It’s about damn time.

You and your ilk had every ability to stop the fraud and looting over the last several decades.  You could have prevented the blowing of your own property bubble and destruction of your federal budget, along with the insane expansion of leverage and “yield seeking” through fraudulent misrepresentation of risk and leverage but you didn’t do so.  Instead you, like the so-called “government regulators” in The United States, knelt before the banking cartels and performed obscene acts so frequently that you wore out sets of kneepads at a rate that kept Home Depot’s profit margins at a record during the decade of the 2000s.  

Now that the bubble has burst you’re whining that you’re going to have to eat the product of your own cooking and willful blindness.

To that I say: Tough crap.

Start locking up the jackasses who did this to the global economy instead of kneeling before Zod for yet more obscenities.  You know who they are.  Just walk down any of your much-vaunted “streets” in “The City” and where you see a $5,000 suit apply a pair of handcuffs.

If you won’t and don’t I predict that it will not be long before the reaction of the Icelandic people spreads – including to the UK.

Whether the people of your country will give you the opportunity to do the right thing when, not if that sentiment spreads is something you may wish to ponder.

A Cautionary Tale

Posted by Karl Denninger

When in the course of human events……

So began a document written over 200 years ago.

But for a very long time, before there were firearms in the hands of the people, there were pitchforks and…..

Yes, that would be torches.

But that is not 200 years ago, or 400, or 1,000.

It is today.

In Iceland.

A land where a handful of banksters robbed the nation and looted its Treasury, then demanded that the public accept paying for the consequences.

The people have risen and declared that these are the acts of a criminal gang.  That the actions that led to this distress were not mistakes, they were instead unindicted and unpunished felonies.  That the people were unwilling and unknowing dupes, not willing participants with equal culpability.

And finally, that they will not pay so the criminal cabal – the international bankster fraternity – will be protected and made whole.

Iceland’s President has said “no”:

“The cornerstone of Iceland’s constitution is that the nation is the highest judge for the validity of law,” Grimsson told reporters at his residence outside the capital Reykjavik today.

Grimsson vetoed the so-called Icesave accord after more than 60,000 of Iceland’s 320,000 inhabitants signed a petition urging him to reject the legislation. His decision means lawmakers must either drop the bill or put the matter to a referendum.

Does anyone know what the laws are governing immigration – to Iceland?

I’m only half-joking.

This is the first President who has acted as a President.  Who has recognized, understood and acted in accordance with the will of the people.

70% of the population appear to oppose bailing out the criminal cabal.

Contrast this with the EESA/TARP legislation. 

By a margin of more than 100:1 and in some districts a margin reported as high as 300:1 The American People called, faxed and emailed their Representatives and Senators, along with the White House, to tell them NOT TO BAIL OUT THE CRIMINAL BANKING CABAL.

Our Congress and President did so anyway.

In Iceland we have seen proof that a strong display of the good old-fashioned torch – with the implied threat of the pitchfork being next – was sufficient for the government to recognize that:

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

I am convinced that our nation will not stop being looted by this very same criminal cabal until The People display the torch and reiterate the foundational principal of this Republic – that we, the people, are stating our intention of revoking The Government’s right to exist should it continue to act at the behest of a criminal cabal hellbent and determined on looting every member of society along with the public Treasury.

The choice is yours America. 

You have seen today that forceful yet peaceful demonstration – a clear and unmistakable statement that the principles that underlay The Declaration of Independence remain in full force and effect, and that we, the people are both willing and prepared to enforce them if it becomes necessary – still works.

That you, not the den of vipers, control the ultimate path of legislation in all civilized nations.

When will you, America, be willing to display your torch?

By Economic Forecasts & Opinions

Stock markets around the world cracked on Friday with the Dow Jones industrial average down more than 150 points (Fig. 1), and commodities plunging as Dubai debt woes unnerved investors, and sent tremors of uncertainty throughout all markets.

The crisis flared after Dubai, a part of the United Arab Emirates (UAE) federation, asked to delay interest payment for six months on $60 billion of debt issued by the state-run conglomerate Dubai World and its main property unit Nakheel.

Concerns that a government-backed investment company risked default ripped through world markets. Investors read it as a sign of yet another sovereign implosion after Iceland and Ireland, and recoiled from risk and piled into dollars.

Las Vegas on Steroids

Dubai World has served as Dubai’s main driver of growth, operating ports, transportation groups, spearheading real-estate & infrastructure projects both at home and abroad. Its real-estate subsidiary Nakheel built Dubai’s iconic palm-tree-shaped island, packed with luxury villas and hotels, many still under construction. Real estate and construction accounts for about 23% of Dubai’s GDP.

With little oil, Dubai financed much of this rapid real estate development with debt. After incurring its estimated $80-$90 billion of debt in a four-year construction boom to transform its economy into a regional financial and tourism hub, Dubai suffered the world’s steepest property slump in the first global recession since World War II.

Deutsche Bank estimates that Dubai’s property prices, both commercial and residential, have halved since August last year, and could fall a further 15-20% this year.

U.S. Banks Less Exposed

Most analysts believe U.S. banks are probably less exposed than European rivals to a potential debt default by Dubai World, but a lack of transparency and the interconnection of the modern financial system make it difficult to know which institutions are ultimately exposed.

Dubai World’s largest creditors are reportedly domestic banks in Dubai and Abu Dhabi. MarketWatch noted data from the Bank for International Settlements which put cross-border banking exposure for the UAE as a whole at $123 billion at the end of June. Of that total, European banks hold 72%, with the United States and Japan only holding 9% and 7% of the exposure, respectively. The United Kingdom is by far the biggest creditor with a share of 41%.

Reminder of Other Risks

On a global scale, Dubai World’s debt problem seems relatively minor, but it illustrates the impact from one tiny country in an increasingly interconnected world. The Dubai news also cast doubt over the strength of the U.S. economic recovery, and the prospects for a bottoming of property prices.

Commercial Real Estate

As pointed out in my previous article that the commercial real estate sector posed a much greater threat than the over-hyped “mother of all carry trades.”  The Dubai debt crisis further reinforces this viewpoint.

The potential for contagion from Dubai’s debt woes could further unhinge an already fragile U.S. commercial real estate sector, whose values have already fallen 42.9% from their 2007 peak, close to the lowest since 2002, according to Moody’s. (Fig. 2) The latest Moody’s projection is for prices to bottom at 45-55% below their peak, but could drop as much as 65% from their peak in a “stress case”.

As commercial property values fall, debt defaults rise. The $3.4 trillion outstanding in debt backed by commercial real estate poses a real threat to the recovery. Trepp LLC reported that last month, delinquencies on U.S. commercial real estate loans that were packaged into commercial mortgage-backed securities reached 4.8%, more than six times the year earlier level. Hotel loans, at 8.7% distressed, have begun falling into delinquency faster than any other kind of commercial real estate debt.

Write-downs and losses at banks around the world have risen to more than $1.7 trillion since 2007 as the credit crisis undermined the value of assets owned by financial institutions, according to data compiled by Bloomberg. Any further deleveraging and the resulting credit tightening from commercial real estate would impede the financial sector and probably derail the U.S. economy sending it into another recession. 

Housing Market Mortgage Crisis

So far, the appearance of recovery in the housing sector is being driven primarily by reduced prices combined with federal programs to lower mortgage rates with the goal of bringing more buyers into the market.

Based on a study released by Zillow.com, the foreclosure crisis has moved beyond subprime mortgages and into the prime mortgage market. (Fig. 3) While subprime borrowers are still a factor in the current foreclosure epidemic, it’s becoming increasingly apparent that the weak labor market is the driving force behind the mortgage crisis we face today.

According to the Mortgage Bankers Association, one in seven U.S. home loans was past due or in foreclosure as of Sept. 30, putting that quarterly delinquency measure at its highest level since the report’s inception, 1972, and up from one in ten at the beginning of the year.

The continued surge in delinquencies suggests that a recovery in the housing market could be hindered by the weak job market as well as by further fallout from the easy money and loose lending practices of the past. The foreclosures and delinquencies are expected to keep rising well into 2010, not leveling off until the unemployment rate starts to moderate.

In a study by First American CoreLogic found that one in four of all U.S. mortgage-borrowers owe more than the value of their properties in the 3rd quarter. And many experts didn’t expect U.S. home prices to hit bottom until early 2011, perhaps falling another 5-10%, as more foreclosures get pushed onto the market.

Negative equity is another outstanding risk hanging over the mortgage market.

Dubai Is No Lehman

The circumstances behind Dubai’s moves are murky, making it hard to gauge the exact risk to the pertaining bonds and Dubai’s own general creditworthiness. UBS cautioned that Dubai’s overall debt “might be higher than the generally assumed $80 billion to $90 billion, due to potential off-balance sheet liabilities. These could include unlimited and unquantifiable amount of credit default swaps (CDS) and other derivatives against the underlying assets, and once unraveled, could potentially erupt into a subprime-like crisis.

The current expectation; however, is that there’s a good chance that Dubai’s problems will probably prove a local issue. Most likely, Dubai, or its neighboring emirate, Abu Dhabi, won’t risk tarnishing their images and reputation further, and will come up with a reasonable resolution.

Even if Dubai goes into sovereign default, the amount is probably not enough on its own to threaten the financial system since any actual losses would be a fraction of the total. So, the problems in Dubai are unlikely to be as serious as last year’s Lehman Brothers collapse, nor is it a reflection on the ability of emerging markets to lead a global economic recovery.

Rational Expectations?

But Dubai could well spur a broader crisis of investor confidence in overly leveraged economies as market confidence world-wide is still fragile from the severity of the financial crisis.  The debts of many emerging markets have risen even further as the countries governments have fought the ravages of the global recession by issuing more stimulus debt to fill the gap voided by private investment.

The spread of credit-default swaps on developing-nation’s bonds jumped 14 basis points after the Dubai news broke, the most in a month, to 3.24 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. There is also a clear sign of potential contagion effects of global risk aversion on basically all risky assets, with the dollar and yen being the prime beneficiaries.

Rational expectations or not, for now, the Dubai crisis is simply a reminder that the severe global recession has relegated much debt to near junk status, and there still remains a high degree of uncertainty as to the percentage recoverable on all outstanding debt which is going to be coming due over the next 5 years.

Despite some seminal signs of green shoots in the news headlines during this 9 month liquidity driven rally in many asset classes around the globe, we should be reminded that all that glitters is not gold, and that the global economic recovery is still on shaky ground.

#  “I know the odds are against me, but if there’s a win I’m gonna find it!”  ~Goku  #

Economic Forecasts & Opinions