Iceland heading for insolvency

According to Gunnar Tómasson and Icelandic economist and a employee of the IMF for 25 years is very disappointed by the IMF stand towards Iceland. He claims that the IMF has failed Iceland in its effort to restore the nation and that the IMF has been acting on behalf of the British and Dutch governments.

This website has claimed since it began that Iceland was in a worse situation that reported officially. That has now been confirmed when the Central bank of Iceland published its findings on the financial status of the Icelandic state. The debt numbers as they were in June show that the debts as a percentage of the GNP (Gross National Product) are close to 233% of the 240% limit of the IMF. According to Gunnar Tómasson Iceland is reaching its payment tolerance limit and is heading towards insolvency. That is, the nation cant pay that much.

The Icelandic government, homes, companies and the banks owe 3323 billion ISK in foreign currency. To put this number in perspective, the Icesave deal is around 750 billion ISK. The whole debt over assets of Iceland is around 6000 billion ISK.imf-trapping-countries-in-debt The interesting thing about those numbers is that they are 3 month old. And the numbers have not been released before because they kept postponing them, just like the IMF is postponing the disucssion about Iceland, again and again.

This means that today each citizen of Iceland owes 10.4 million ISK. Every man, woman and child.

The IMF was supposed to discuss the Icelandic situation on the 14th of September, but that was recalled and now it is expected to be discussed most likely in October. After that it will become clear if they will grant Iceland the big loan or not. The same thing goes for the Scandinavian loans, that will not be delivered until the IMF gives the green light.

The IMF loan is for 2.1 billion USD total, and the Scandinavian nations have pledged to lend 2.5 billion USD and will the first quarter of that loan be delivered at the same time as the IMF second payment of it’s loan.

The conclusion must be that the situation is worse than they care to admit.

In an interview yesterday Josheph Stiglitz, the Nobel price winner for Economics said that the IMF is doing Iceland harm. Stiglitz part is in English and is in the second half of the show.

Below is a quote from an article by Nathan Lewis from the Huffington Post. The article is called; The IMF Destroys Iceland and Latvia.

„The International Monetary Fund operates primarily as a banker bailout machine. They cajole and tempt and confuse and threaten the leaders of governments worldwide to pay off the failed bets of the big bankers using the taxpayer funds of their countries. This has been going on a long time, at least since the early 1980s.

Thus, I am not in the teeniest bit surprised that the same thing is happening today in Iceland and Latvia.

This article by Michael Hudson has some of the details:

For the past decade Iceland has been a kind of controlled experiment, an extreme test case of neoliberal free-market ideology. … Is there a limit, a point at which government will draw a line against taking on public responsibility for private debts beyond any reasonable capacity to pay without drastically slashing public spending on education, health care and other basic services? …

The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts — Iceland’s bankrupt Kaupthing and Landsbanki with its Icesave accounts, and heavily debt-leveraged property owners and privatizers in the Baltics and Central Europe — but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders.

This is the trick: replacing private debts with public obligations. Lots of people loaned money to banks and corporations in Iceland. They are now facing huge losses.

What is supposed to happen here is: they take their losses. There was no government guarantee. Why should someone with no relation to this business deal have to pay off their losses just because they happen to live in Iceland?

The government of Iceland may not actually have the money to pay this off. They would have to borrow it. When the IMF makes a “rescue loan” to a government, the money spends no time in Iceland or Latvia. It goes directly to the foreign creditors, in places like New York and London.

However, the debts remain, to be paid off by the taxpayers of Iceland. Taxes rise, which just makes a bad economic situation worse. Valuable and important services are cut — precisely when they are most needed. Then, the IMF “advisors” come in and start to make a lot of demands.

For example, they may demand that the government sell off “public infrastructure” and the assets of failed banks (which still have considerable value) to pay off the loans which were used to bail out the bankers in New York and London. Who buys this “public infrastructure”?

Typically, it’s the bankers in New York and London! Normally, at very good prices — very, very good prices. Extraordinarily good prices.

Prices for assets in a crisis are normally very low. But, a government that can be coerced into bailing out the bankers can also usually be coerced into selling off state assets at values that no private owner would accept.

Hudson calls this “neoliberal free-market ideology.” Of course, it has nothing to do with the principles of capitalism. You could call it a form of fascist imperialism. I think John Perkins, author of Confessions of an Economic Hit Man and The History of the American Empire, would agree with this terminology.

It is hard to tempt and cajole and confuse world leaders when you use unpleasant terms like “fascist imperialism.” That’s why these proposals are camouflaged with labels like “neoliberal free-market principles,” when they have nothing to do with free-market principles.

It’s not about “conservative” and “liberal.” It’s about us against the banker imperialists.

The IMF should be abolished.

Article ends.


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