The Brain Drain has begun. IMF and the Glacier Bonds

An interesting idea has surfaced at the parliament about the Glacier bonds (see Glacier bond explaination here). The Citizen movement, the new political party suggested that instead of being economically crushed by threat that the Glacier bonds hold over the economy.

The danger is that all the bonds will be cashed in that would subject the fragile economy to be injected with billions of ISK. That could very well lead to a complete economic bankruptcy of Iceland as a nation. We are hanging on by a thread at the moment, and the bonds are like scissors waiting to cut the last thread.

The interest rates Iceland has to pay because of the Glacier bonds alone are massive. The solution proposed by the Citizen movement party is to tax the interest rates 90%. It is not very original in that sense, since Barack Obama did the same thing when taxing the large bonus payments of the auto industry companies that the US govbrain_drainernment had to rescue.

The idea is still an interesting one. We are in a state of emergency now, and drastic measures are needed. If the Icelandic public has to pay for the IceSave accounts up to 100% while only recieving 70% themseslves of their own savings, we need a solution. And we need it fast.

The Citizen movement is a small party who got all the “angry votes” in the last elections. It is a small group, and will probably not get this matter through parliament. More will be written about the CM later.

The guiding interest rate set by the Central Bank of Iceland in accordance to the wishes of the IMF are dragging the companies into bankruptcy on a massive scale. We have the highest interest rates in the western world. The Glacier bonds are in the center of the whole thing. The Icelandic Krona is so fragile, in fact it is a ruined currency, nobody believes in it anymore, everyone wants to get rid of it. If or when that happens the effects will be devastating.

The IMF is in fact in control of the Central Bank, more or less. Nothing gets done without their approval or things are done after the IMF´s own suggestions. The IMF has no control over local taxes, so Iceland should be able to stop the outflow of cash via interest payments of the Glacier bonds, that are crippling the economy.

Owner of the Glacier bonds. A list from December 2008

Radobank in Holland 78 billions ISK
The German Investment bank KFW 42 billion ISK
The European Investment bank 33 billion ISK
American Development bank 22 billion ISK
International R&D 15,9billion ISK
Toyota 15,9 billion ISK
Rentenbank 7 billion ISK
Others 19,8 billion ISK

The companies bleed out. The homes are bleeding out. The people are leaving the country in search for survival abroad. One family is moving every single day from Iceland. Young people with education and kids.

The Brain drain has begun.

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