The Capital Crime Against Iceland

Travel-to-Iceland--hillsBy Karla Fetrow

Pride and Progress

There is a land as beautiful as my land, as challenging and harsh in its climate, as diverse and demographically populated as my people.  They speak a different language, but they have the same pride in their culture.  These people are the Icelanders.  My first real introduction was receiving a video on Iceland from a Norwegian friend.  I didn’t understand the words, but I understood the music and the swelling of emotion as the tape showed the waterfalls, the volcanoes and the deep blue waters of Iceland.

Iceland again caught my attention when it became a leader in clean energy.  Tapping into all their natural resources; waterfalls, geysers, volcanoes and hot springs, they supply virtually all their energy for electricity and heating.  Iceland ranks 53rd in the world in greenhouse gas emissions per capita, according to the Carbon Dioxide Information Analysis Center — the primary climate-change data and information analysis center of the U.S. Department of Energy.

They are still oil dependent for vehicle transportation, but again leading by example, they have been developing advanced fuel cell technology.  Fuel cells use hydrogen, which is produced through water and electricity; and Iceland has plenty of both.  “The fuel cell car is just like a normal car,” said Asdis Kritinsdottir, project manager for Reykjavik Energy. “Except the only pollution coming out of the exhaust pipe is water vapor. It can go about 100 miles on a full tank. When it runs out of fuel the electric battery kicks in, giving the driver another 18 miles — hopefully enough time to get to a refueling station. Filling the tank is similar to today’s cars — attach a hose to the car’s fueling port, hit “start” on the pump and stand back. The process takes about five to six minutes.”iceland-geothermal-to-thaw-frozen-economy_1

Iceland has been a leader in medical research on spinal cord injuries.  In 2001, the conference, “New and Emerging Approaches to SCI,” was sponsored by the World Health Organization (WHO) and Iceland health officials.  About 30 scientists attended the conference, including representatives from Brazil, China, England, France, Iceland, Israel, Mexico, Russia, Sweden, and the United States.  They covered every aspect of spinal cord treatment from stem cell research to functional electrical stimulation and bio-mechanics.

Based on his Red Cross experience treating the Afghan war wounded in Pakistan and the Romanian poor, Anba Soopramanien discussed SCI rehabilitation in the developing world. Most of the world’s SCI patients do not have access to the sophisticated, costly, rehabilitative technology that those in developed nations take for granted. For example, Somalia’s $11 per capita health-care expenditure (compared to about $1,800 in Iceland and $4,700 in the U.S.) can do little to promote SCI rehabilitation. Given such economics, Soopramanien felt, among other things, that Western-trained SCI professionals should supplement their expertise with the wisdom offered by more affordable and accessible traditional or indigenous medicine. Overall, said Soopramanien,  there is little appreciation of the concept of integrated SCI health care in developing countries. To truly alleviate the world’s SCI-related suffering and mortality, we must work with the third world as a partner to develop new SCI-care approaches, strategies, and paradigms suitable to unique cultural conditions.

iceland banksThe Ice Save Melt Down

Iceland was a poster child country; progressive, diplomatic, even receiving recommendations from Russia for its hospitality.  It was affluent.  It’s three leading banks, Kaupthing, Glitnir and Landsbanki invested its capital in the flourishing stock market, as did so many other countries.  It affiliated itself with the United Kingdom Bank, which generously lent them large sums of money.  Its portfolio looked good; a small but sovereign country with no outstanding debts and invested in capital enterprise.  In September of 2008, this all changed.  While the financial institutions of the United States began filing bankruptcy and scrambling for a shelter, the banks of Iceland were hit with their own collapse.

According to economics professor, Willem Buiter, “During the final death throes of Iceland as an international banking nation, a number of policy mistakes were made by the Icelandic authorities, especially by the governor of the Central Bank of Iceland, David Oddsson. The decision of the government to take a 75 percent equity stake in Glitnir on September 29 risked turning a bank debt crisis into a sovereign debt crisis. Fortunately, Glitnir went into receivership before its shareholders had time to approve the government takeover. Then, on October 7, the Central Bank of Iceland announced a currency peg for the króna without having the reserves to support. It was one of the shortest-lived currency pegs in history. At the time of writing (28 October 2008) there is no functioning foreign exchange market for the Icelandic króna.”

Iceland had just suffered the same demise as the American banking institutions, but without the advantage of printing out a few trillion dollar bills to keep the economy buoyed.  Iceland was left with a debt that rested solely on the backs of its people., and without one lender to support them.   No Euro dollars.  No American dollars.  No back up of any kind except their own resources.

On the day after Glitnir’s nationalization, on the 30th September, GBP (British Pound Sterling) 37 million was taken out of Kaupthing Edge bank accounts in the UK. This massive withdrawal triggered a ‘code red’ on the state of Singer & Friedlander. In response, Singer & Friedlander announced it would increase its funding from Kaupthing by an additional GBP 1.1 billion; but the mother company could not provide such funding.  The remaining assets were frozen and Kaupthing collapsed.
Aftermath of the Stormiceland riots

The anger of the Icelandic people is understandable.  The Holland and London based financial institutions insist that the citizens of Iceland are responsible for the banks they had invested in, and they want their money back now.  They are willing to pay back the debt.  The yoke is a yearly interest charge on the 3 billion GBP (ten billion dollars) that laps up the entire tax base of the 300,000 citizens.  Many feel fraud was involved and Kaupthing recently took the English banks to the high courts to prove it.

Although the general consensus has been, if England had not withdrawn such massive amounts from the Icelandic firm, Kaupthing would not have collapsed, the High Court of London decided the London banks were not at fault.  Iceland had nationalized one of its banks, leaving the other two questionable as to their ability to remain within the International arena.  Almost as though it was deliberate, almost as though to verify the words, “no good deed goes unpunished”, Iceland was dethroned from a leading voice in global progressive unity to a humiliated country in one sure stroke of the economic sword.

Since Iceland’s spiral into economic ruin, the mood of the people is dismal.  The unemployment rate of 8,2% hasn’t been higher since 1997.  The construction of a half finished concert hall overlooking Flaxifloi Bay, which was to be a symbol of their prosperity, has halted, with estimates that its completion will not take place until 2011.  Businesses, restricted by their local currency, are floundering.  Loan payments have doubled.  Crime has skyrocketed.  Bitter tensions have erupted between Iceland and Great Britain.  The Icelandic people blame everyone from Britain and its Prime Minister Gordon Brown, to the EU to the big Icelandic investors – sarcastically referred to as the “Vikings” – whose antics abroad are considered to be a big catalyst in Iceland’s downfall. Many of these so-called Vikings have felt the full force of that wrath. Their cars and houses have been vandalized – a level of violence unheard of in Iceland for many decades.

Getting the Best for Cheap

As Iceland struggles to recover, it turns to tourism and small business endeavors that include private services such as dining and handcrafts.  The International exchange remains difficult with its weak currency.  October 26th. McDonald’s pulled down their golden arches.  Citing rules that entailed buying their beef and other ingredients with Iceland’s weak currency, the global franchise claimed doing business with Iceland is just too expensive.

According to Thomas Friedman, correspondent for the Nordic Financial Times, there are pro’s and con’s involved with McDonald’s decision.

The pros: as per Thomas Friedman: “No two countries that both had McDonald’s had fought a war against each other since each got its McDonald’s.”

The cons: variously, McDonald’s is a symbol of American cultural imperialism, capitalism, environmental meat-eatist degradation. And, of course, its departure could now mean that Iceland, now off the special sauce, is also off the world’s economic grid.

It seems wrong, somehow, that a country that had given the world the best of its medical expertise and had pioneered into renewable energy resources should now be ignored by the very countries that had benefitted from it.  It seems even more disproportionately wrong when you consider that these contributions to global knowledge came from a country of 300,000 people; a population no larger than that of any medium sized  town within the developed countries.  The efforts of Kaupthing to file against the giants of finance, Great Britain and Holland, were like the voice of a single individual filing against a major insurance company.  It needed other countries that had experienced similar plights, to back it.  It needed to file a class action suit.

Iceland is angry; so angry, the citizens boldly suggest their country join Russia or Canada; even though they have been a sovereign country since 1947,  while the government works frantically for admission into NATO.  The application into NATO is based off necessity, not the good will of the people.  The people feel the banks of London and Holland failed them.  They feel Europe failed them.    They feel NATO will let them down.  The truth is, we have all been let down when the global economy is being played by a handful of bankers with the win-lose mentality of a monopoly game with a twist; they manufacture their own money.  The truth is that a country with an abundance of resources, both in natural materials and intellectual property, should not have been brought to its knees.  The truth is that the lessons learned from Iceland should not have been how small countries should never try to compete against veteran Capitalists, but how small countries can thrive on their own ingenuity.    They should have been a hope, an inspiration for a brighter tomorrow.  Instead, they have been one of the worst examples of economic failure in a world crisis.  They have been a lesson in how to get the best for cheap and then exploit it.

About karlsie

Some great perversity of nature decided to give me a tune completely out of keeping with the general symphony; possibly from the moment of conception. I learned to read and speak almost simultaneously. The blurred and muffled world I heard through my first five years of random nerve loss deafness suddenly came alive with the clarity of how those words sounded on paper. I had been liberated for communications. I decided there was nothing more wonderful than writing. It was easier to write than carefully modulate my speech for correct pronunciation, and it was easier to read than patiently follow the movements of people’s lips to learn what they were saying. It was during that dawning time period, while I slowly made the connection that there weren’t that many other people who heard the way I did, halfway between sound and music, half in deafness, that I began to understand that the tune I was following wasn’t quite the same as that of my classmates. I was just a little different. General education taught me not only was I just a little isolated from my classmates, my home was just a little isolated from the outside world. I was born in Alaska, making me part of one of the smallest, quietest minorities on earth. I decided I could live with this. What I couldn’t live with was discovering a few years later, in the opening up of the pipeline, which coincided with my first year of junior college, that there were entire communities of people; more than I could possibly imagine; living impossibly one on top of another in vast cities. It wasn’t even the magnitude of this vision that inspired me so much as the visitors who came from these populous regions and seemed to possess a knowledge so great and secretive I could never learn it in any book. I became at once, very conscious of how rural I was and how little I knew beyond the scope of my environment. I decided it was time to travel. The rest is history; or at least, the content of my stories. I traveled... often to college campuses, dropping in and out of school until one fine day by chance I’d fashioned a bachelor of arts degree in psychology. I’ve worked a couple of newspapers, had a few poems and stories tossed around in various small presses, never receiving a great deal of money, which I’m assured is the norm for a writer. I spent ten years in Mexico, watching the peso crash. There is some obscure reason why I did this, tightening up my belt and facing hunger, but I believe at the time I said it was for love. Here I am, back home, in my beloved Alaska. I’ve learned somewhat of a worldly viewpoint; at least I like to flatter myself that way. I’ve also learned my rural roots aren’t so bad after all. I work in a small, country store. Every day I greet the same group of local customers, but make no mistake. My store isn’t a scene out of Andy Griffith. The people who enter the establishment, which also includes showers, laundry and movie rentals, are miners, oil workers, truck drivers, construction engineers, dog sled racers and carpenters. Sometimes, on the liquor side, the conversations became adult only in vocabulary. It’s a good thing, on the opposite side of the store is a candy aisle filled with the most astonishing collection, it will keep a kid occupied with just wishing for hours. If you tell your kids they can have just one, you have an instant baby sitter; better than television; as they agonize over their choice while you catch up on the gossip with your neighbor. We also receive a lot of tourists, a lot of foreign visitors. They are usually amazed at this first sign of Alaskan rural life style beyond the insulating hub of the Anchorage bowl. Many of them like to hang around and chat. They gawk at our thieves wanted posters. They laugh at our jokes and camaraderie with our customers. I’ve learned another lesson while working there. You don’t have to go out and find the world. If you wait long enough, it comes to you.

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27 Comments on “The Capital Crime Against Iceland”

  1. I followed this story as it happened, and I thought to myself, “This is America in a few years, when the money runs out.”

    It truly is a capital crime (pun intended; I’m sure), perpetrated by a handful of babe-in-the-woods ‘bankers’ whose only credentials were a quick formal education followed by a swift dunk in the snake-pit. Iceland has gone from progressive example to failed-state.

    McDonalds’ pull-out is a microcosm of that failure.

    It’s too late to save the Icelandic currency; handicrafts won’t build a national economy again, and my favorite band, Sigur Ros, can’t do it by themselves, either.

    This one’s going to take decades, and the country will never be the same.

    A cautionary tale; this – and proof that unbridled, unregulated capitalism is not only at fundamental odds with democracy – it’s at odds with anything else that truly matters to humanity.

  2. A very good analysis, with the exception of the weird mixup with NATO. Iceland was one of the very first members of NATO; it’s the EU that the leading party in the governing coalition wants to join, a decision that is opposed by more than 60% of Icelanders. Rather a clumsy mistake, methinks!

  3. Astra, what truly bothers me is that Iceland has in its possession some of the best renewable energy technology on the face of this planet; a technology they had been willing to share with an energy starved planet. Much of what they now use is what our corporate engineers have been insisting for years is impractical and impossible. I wonder if part of the motivation in stamping out Iceland’s economic base has to do with a deliberate attempt to control the amount of this technology used and when it will be used; i.e., when it’s completely tied into corporate management hands. The accusations of fraud have not been completely drowned out. Maybe the global community should join that small but brave country in a class action suit.

  4. Karla, I’m not one for vast conspiracies – or even modest ones. I don’t believe anyone intended Iceland to go broke because of their progressive energy projects – rather; I think they went broke because their government took its collective hand off the tiller and let the passengers – in the form of very inexperienced bankers – run the ship.

    It’s a fact that 200 square miles of PV collectors in the Arizona/New Mexico desert could provide as much electricity as we’d ever need in America. That we’re not doing this is another ‘capital’ crime….

  5. I’m not a huge fan of conspiracy either, but i don’t exclude subterfuge and intrigue. Conspiracy involves organization, intrigue is something that can be done on an individual basis. For something to be suppressed or invalidated in the problem solving arena when the solution is good, there has to be the self interest of individual intrigue to create an opposition. The problem with unraveling minds that deal in intrigue, is they do things you would never think of doing because it defies your sense of fair play.

    I agree, Iceland went broke because they tried to play hard ball with the big boys who are not very nice at all. I also feel, however, that as the country that opened the door to green technology, we should consider that valuable resource and support its development. Around the world people are evaluating their currency, wondering if they’ll be the next to topple. They shouldn’t be looking at these pieces of paper with numbers written on them. They should be looking at what they have, can offer, are able to develop. That’s where value lies. What good will it do the banks to sit on their sacks of money, with rusting technology crumbling away at their feet because the tax payers can’t afford better? What good will it do them if what they have for sell isn’t worth anything and nobody can afford it anyway? Poverty, a tad different from prosperity, has a trickle up effect.

    And yes, i did intentionally use “capital” over “capitol”. It was, after all, a crime involving capital.

  6. Actualy Iceland is part of Nato. One of the parties that is currently in government is trying to get us into the EU while the other is against it, its a quite a humorous show.

  7. Correction: Iceland hasn’t applied for NATO membership. It’s been a NATO member for half a century.

    The government of Iceland has, however, applied for EU membership, hoping to get some financial backing from the European Central Bank, whose banking regulations contributed to the unfortunate developments in Iceland for which the general population is forced to pay the bill.

    It’s also worth mentioning, that Iceland has been coerced into paying a bill (for the losses of British and Dutch savers who put their money into the fallen Icelandic banks) without the right to challenge the claim.

    The British and the Dutch have heavily used their influence in the international community to prevent Iceland from receiving international aid, until it’s regognized the (disputed) claims made by the British and the Dutch. It’s like preventing access for ambulances to an accident scene until one of the victims has claimed full responsibility for the accident and promised to pay full damages without possibility of settling the matter in court. To me, this doesn’t sound like the handlings of civilized people (or civilized nations). They’re acting more like collectors of drug debts to just want their money, not caring whether it’s the drug addict who pays, or his family.

    Iceland does, indeed, have a great responsibility in this matter, for it’s lack of regulatory control. The responsibility is, however, divided and both the British and the Dutch are not without fault in this and neither are the EU and the British and Dutch savers, themselves.

    Iceland will, however, have to pick up the entire bill…at gunpoint.

  8. I apologize to the Icelandic readers for the (i agree) clumsy mistake of writing NATO instead of the European Union. I stand corrected.

    Johann, removing the regulatory control is the reason the US housing market crumbled and why the US dollar is suddenly on some very shaky ground. The sky was the limit so people reached for the sky, with the generous hand of the banking institutions covering their bets. It was a shyster game after all, a game in which there would be really only one winner; the banking institutions. They are culpable. It was their job to regulate a fair exchange rate based on individual assets. The definition of assets escalated into an unrealistic appraisal of future gains based on past performances, without taking into consideration, supply, demand and inflated prices. Iceland suffered the same fate as the US housing market, only this time the house happened to be the home of 300,000 people.

    As an Arctic Circle citizen, i feel a great violation has been committed against my neighbor; one from which none of the low population, high natural resource countries are safe. Like someone who has a criminal stalking my neighborhood, i tremble. The world has changed its chant from “oil” to “green energy”, which is good, but should the densely populated world be allowed to drain the natural resources from the sparsely populated countries cheaply under the guise of an equitable monetary system? This would be neither equitable or fair. If the world’s monetary system was to choose natural resources as the deciding factor of currency value, the banks of London, Holland and the United States would be floundering, as the resources most in demand are the ones the urban populations don’t own; clean water, abundant marine life, ability to grow healthy, sustainable foods, adequate forests and wild life. To allow corporate industry, backed by the financial institutions to cheaply and shamelessly exploit our last remaining frontiers at the expense of the environment and the well being of the natural citizens, is allowing the boils of infection to turn into a terminal cancer.

  9. As I read this article and the comments the things that stand out to me most is the spirit itself of Icelandic people. Astra mentioned that Sigur Ros is one of his favorite musical groups and I have to concur. There are many many more musicians, artists, playwrites and novelists that hail from that small Island. The spirit of the people who decided to dig in and settle there is their biggest resource and I do not think they are doomed because of this. I do think the handcraft, small industries and the still growing technology coming out of that area will save it. The fact that they are small may be the thing that makes this possible where countries like ours cannot agree on a course being too big and varied. It does seem like advantage was taken of them by the world banks, however they are in a unique position of having most of what they need for survival to hand. Bugger the Mc-harness of the U.S. They are better off without it. We will eventually be needing the sustainability that they have and then we will all have to treat with them.

  10. Grainne, i appraise the Icelandic people in much the same way. My pre-pipeline memories include very open communications and visitor exchange rate between Alaska, Iceland and Greenland, which dropped pretty quickly with the first major oil discoveries. Since i was very young at the time, and there was a great deal going on, it wasn’t something i thought about until now; in hindsight.

    When i first listened to the soaring music and voices in the Icelandic video, i heard that same swell of pride i feel and hear when our own voices willingly sing, “Eight Stars of Gold”. There is an enormous connection to birth place in areas that contain deep generational roots that’s difficult for transient societies to understand. This is the glue that holds together the society, that deep, abiding love for the land and the community; that pride; that wonderful pride in endeavors and accomplishments built on virtues. Iceland has an enormous amount to offer. Like Russia, which is also a tenacious country, pulling itself out of every misfortune through sheer determination, Iceland will inevitably fare much better than other countries just beginning to feel the ripple effect of the collapsed banking institutions. Their infrastructure is strong. America’s is not. As America’s economy collapses, it doesn’t have already developed renewable energy to fall back on. It doesn’t have readily available cheap food resources to sustain it, advanced diplomatic relationships with other countries to allow it agreeable options. It built its reputation on advanced industry and technical knowledge. It retained its position by becoming a bully. Who will assist America voluntarily as it goes down? I think much will depend on whether or not America can get over it’s my way or the highway attitude.

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