[EnergyUnlimited]

Hyperbole and twisted logic at its' best EnergyUnlimited. It actually works in the opposite in it the most basic sense. Defaulting on debt actually frees up resources for infrastructure because money going into interest payments is simply lost money. Instead up plowing tax money into unpayable debts the money is spent on real goods and services including infrastructure upkeep.

But after defaulting your money are not worth much, not even wanted.

After global general default a lot of manufacturers of countless goods across the globe will simply go unpaid.
It is not only banking sector who will end up annihilated.

So you will no longer be trusted, foreign contractors will demand payments in commodities, manufacturing countries like China will end up solicited by their own industry not to accept other forms of payment etc.
Local contractors on the other hand will no longer trust in value of currency even if they are forced by law to accept it.
Highly inflationary environment will result where any money you generate are quickly losing their value.
Ultimately you will need to resort to commodity (say PM) based currency even locally.

So countries devoid of plentiful commodities will find this situation unsustainable.
Again, I believe that this is the way for our civilization to go down the drain.
You will get your defaults, but as a result there will be no reason for advanced infrastructure typical for modern society to carry on existing.

Why?

Because it will no longer make a sense for anyone to contribute to its maintenance.

[kublikhan]

* Iceland's unorthodox policies provide good test case
* Decision not to make taxpayers liable for bank losses was right, economists say
* Capital controls were necessary and are now seen as useful addition to policy toolkit

Private creditors ended up shouldering most of the losses relating to the failed banks, and today Iceland is experiencing a moderate recovery. Unemployment is declining, and the government was able to return to the capital markets earlier this year. “What was seen as a disaster for Iceland three years ago is increasingly being seen as good fortune with the passing of time. Icelanders may have lost their financial system but instead they were spared the burden of nationalizing private debt,” said Árni Páll Árnason, Minister of the Economy.

The sheer scale of the economic collapse meant that Iceland was forced to think outside the box as it sought to address the crisis. The policies that were adopted included capital controls to prevent massive capital outflows and a disorderly depreciation of the exchange rate, allowing the banks to fail and not socializing the losses, and a decision not to tighten fiscal policy during the first year of the program, which helped protect the country’s welfare state, IMF resident representative Franek Rozwadowski said. Other speakers who strongly supported Iceland’s decision not to bail out the banks included MIT professor and former IMF chief economist Simon Johnson, who also warned that the world’s financial system remains “a big house of cards.”

Lessons for the IMF
What, then, should the IMF take away from its cooperation with Iceland? The Fund learned three main lessons, Shafik said.

•When countries have a clear strategy in mind, as was the case in Iceland, it becomes much easier for the IMF to engage and provide policy support and advice.
•There are clear advantages to having a heterodox toolkit―more tools are better than fewer.
•Iceland set an example by managing to preserve, and even strengthen, its welfare state during the crisis.

Recent IMF research has shown that countries tend to grow faster and more consistently when income distribution is more equitable, so the Fund is now paying much more attention to these issues in its programs, she said.

Iceland's Unorthodox Policies Suggest Alternative Way Out of Crisis

Whoa. the IMF actually said it learned countries grow faster when income distribution is more equitable? Criminal bankers are on the run with warrants out for their arrest? Common people writing the laws of the land with no input from political parties? I guess pigs can fly.

[smiley]

Disagree. Blame lies with the global neo-liberal financial/economic/political system, blaming indviduals, beyond their blantant direct culpability for specific crimes is pointless unless they are active agents/advocates for the status quo[/b], in which case we know where to point fingers.

They do not have a secret room at Morgan Stanleys where they put some electrodes to your head and turn a law abiding citizen in a servant of the Mammon. The system you talk about manifests and concentrates itself in certain institutions, whether political and private, but it originates in society.

Every society gets the demons it deserves.

This entire concept of the public bailing out private debts (tabs)

My point again is that one should be responsible for its own actions. I have no problem with the Icelandic refusal to bail out the foreign deposits of their banks, but I do have a problem with the Icelandic people asking the rest of the world to pick up the tab for their internal private debt.

I suggest we value other things above productivity, perhaps take a moment to reflect upon what richdom is to you, is the output of your labour what you value most highly?

Well since you ask. Though I'm not a terrible materialistic person, I'm not ashamed to say that except for the immaterial I also value the material. I am proud of quite a few things I have. In that sence I would call my self rich or fortunate at least.

But there is more to it. Richdom (for me at least) has a certain aspect of worthiness or achievement(by lack of better words).

For instance I could steal a million bucks from a bank, but I would not be rich, I just would be a guy who stole a million bucks. The fact that I obtained things by work ing for them and by adhering to my principles make me rich.

If you would be able to take a helicopter ride to the top of the mount everest that would not make you a mountaineer, yet when I look around I see a lot of people looking for helicopters expecting the same degree of gratification.

And yes I realise these things sound terribly corny.

[Fiddlerdave]

But that is okay because (according to the linked article); " This level of overall external debt is generally not seen as a problem because the UK also holds high-value assets."

which might lead one to wonder what those "high-value assets" are that UK holds? It pubs? Nah. Anheiser Bush owns them now. It's Morris Minor line of fine autos?

I know!!!!!! It's valuable French debt. Which holds valuable Greek debt.

This circle-jerk of "valuable assets" supposedly securing our financial systems would be hilarious.

If it were not so true!

[smiley]

TNow compare to Ireland: 1.7 trillion euro foreign debt or 390,969 per capita with a GDP of 200 billion euro

Well for England I'm not sure, but the high level of external debt in Ireland is maily caused by foreign banks simply registering their debt In Ireland due to the fiscal climate there. For instance German banks register their debt with their Irish branches to get the tax benefits in Ireland. Thats why there are more than 50 banks active in Ireland.

For England and Luxembourg being major financial hubs something similar could be the case.

I'm not sure where the risk in these constructions lies. One could say that since this debt is held by Non-Irish banks, this debt is not influenced by the irish economy. For instance when the interest rates on Irish debt rises, this will not affect the interest rates on debt owned by eg the Deutsche Bank, therefore this debt will not weigh down on the economy.

On the other hand when the Deutsche bank would fail I wonder who will get the most heat, Germany because the bank is German, or Ireland because the debt is registered to an Irish subsidiary. It wouldn't surprise me if it were the latter.

[dissident]

TNow compare to Ireland: 1.7 trillion euro foreign debt or 390,969 per capita with a GDP of 200 billion euro

Well for England I'm not sure, but the high level of external debt in Ireland is maily caused by foreign banks simply registering their debt In Ireland due to the fiscal climate there. For instance German banks register their debt with their Irish branches to get the tax benefits in Ireland. Thats why there are more than 50 banks active in Ireland.

For England and Luxembourg being major financial hubs something similar could be the case.

I'm not sure where the risk in these constructions lies. One could say that since this debt is held by Non-Irish banks, this debt is not influenced by the irish economy. For instance when the interest rates on Irish debt rises, this will not affect the interest rates on debt owned by eg the Deutsche Bank, therefore this debt will not weigh down on the economy.

On the other hand when the Deutsche bank would fail I wonder who will get the most heat, Germany because the bank is German, or Ireland because the debt is registered to an Irish subsidiary. It wouldn't surprise me if it were the latter.

Thanks for the clarification. The definition of foreign debt appears to be deficient. It sounds like a lot of Ireland's "debt" is like ships flying the Liberian flag. They should separate Irish debt obligations from German debt obligations, etc.

Anyway, Ireland is experiencing an explosion of government debt:
% of GDP YOY change
2007 24.936 0.91 %
2008 44.356 77.88 %
2009 65.245 47.09 %
2010 94.924 45.49 %

and for Greece:

2007 105.412 -0.65 %
2008 110.721 5.04 %
2009 127.1 14.79 %
2010 142.757 12.32 %

So Irish government debt has been exploding in the last 3 years but the growth in Greece is much more moderate. The coverage of Greece in the media is highly skewed.

[smiley]

Anyway, Ireland is experiencing an explosion of government debt:

Correct but there are some differences between Ireland and Greece.

1) The Irish deficit is not structural, the expenses in 2010 and 2009 were mainly related to interventions, in preceding years the budget was pretty well under control. This you can see if you extend the series to 2000 (2000 37.465, 2001 35.198 2002 31.912, 2003 30.729, 2004 29.129, 2005 27.057, 2006 24.711, 2007 24.936). For 2011 the budget defict is assumed to be below that of Greece and GDP growth is positive again.

Greece on the other hand has been running persistent structural deficits for many years. State finances are a mess especially on the revenue side as is the economy.

2) Ireland has a much greater difference between the gross and the net debt: Greece gross 142.757, net 142.757: Ireland gross 94.924, net 78.042. So Ireland has some assets against their debt whereas Greece has none. With Greece all debt can be considered to be down the drain.

Ireland has spend 50 billion nationalizing some of their banks, this will count both as debt and as assets (Not sure how much they will yield in a fire sale, but at least Ireland has a chance of getting some money back.

The coverage of Greece in the media is highly skewed

.
I think the media are correct in portraying Greece as a basket case. For Ireland I think the chances of recovery are a lot better. Though it is hard to say at the moment. If the financial markets and media take aim at Ireland, they could be in serious problem, but I think that goes for any country at the moment regardless of the state of their finances.

[Margarethe]

I can't believe it. Watch the glaciers melt so they can drill for oil? Is that assistant aware of rising sea levels, loss of fresh water, climate change?

[dolanbaker]

I can't believe it. Watch the glaciers melt so they can drill for oil? Is that assistant aware of rising sea levels, loss of fresh water, climate change?

Are you referring to the glaciers in Iceland! The area is a volcanic tectonic plate spreader zone, just about the last place on Earth to go exploring for oil! It will be a volcano eruption that will melt it, nothing to do with climate change at all.

[Keith_McClary]

A conversation with the President of Iceland. 48 minutes audio, available as podcast.
How Iceland democratically voted to give the banksters a haircut and the sky did not fall on their heads - they are recovering better than mainland Europe.

[oddone]

From Washington's blog: Iceland is doing it right... And everyone else is doing it wrong:

http://www.washingtonsblog.com/2012/08/ ... wrong.html

It does not surprise me that Iceland got this right. Investors should always be forced to take the losses on their failed investments. And fraud should be prosecuted.
In the rest of the world the fraudsters quietly got away, their failed financial schemes bailed out.

[Subjectivist]

At a press conference in Washington on Thursday, the International Monetary Fund (IMF) affirmed its opposition to policies that discriminate against foreign investors when it was asked about a dispute in Iceland.

Iceland has completely turned itself around nearly a decade after a severe economic collapse. The economy has strengthened, and it’s now growing faster than many other major countries. The government, however, faces criticism over a policy that discriminates against foreigners who invested in Icelandic assets.

The government implemented capital controls after the 2008 financial crisis in an emergency move to help stabilize its economy. In deciding to exit the capital controls last year, the government then passed a law which gave a subset of the country’s investors, called offshore krona holders, two choices: they could sell their bonds to the government at a steeply discounted exchange rate or have their funds locked in low-interest bank accounts.

Iceland’s exit of capital controls was well received by the IMF initially. The IMF has established metrics for countries exiting capital controls that require maintaining a specific level of reserves. When the restrictions on foreign investors first passed in mid-2016, news outlets cited the IMF’s approval for Iceland’s policy against offshore krona holders as an essential part of its broader capital controls liberalization plan. But the IMF brought into question its support for Iceland’s restrictions on foreign investors during its news conference Thursday.

“I’m not familiar with those statements from the Iceland authorities nor the details of the issue so maybe we can come back to you after the briefing on that if we have anything,” IMF Communications Director Gerry Rice said at a press conference when asked by InsideSources. “In general, no, we do not support those kinds of restrictions.”

The IMF Articles of Agreement forbid discrimination against investors on the basis of nationality. The IMF was less steadfast in a report from last year. The report said the restrictions were enforced effectively but warned against prolonged use. The report didn’t outright condone or condemn the plan despite stating that it was implemented effectively.

“Staff urged a comprehensive plan be developed to guide capital account liberalization for residents,” the IMF report stated. “Capital controls have been enforced exceptionally effectively. Their prolonged use, however, is increasingly amplifying distortions.”

Foreign investors were left with no choice except to accept less on their investments even though the economy is growing. The Organisation for Economic Co-operation and Development (OECD) reported the economy is now on the upswing putting the policy in question.

“Economic growth is strong with continued expansion in tourism, robust private consumption and favourable terms of trade,” OECD stated in an economic outlook last year. “Steep wage gains, employment expansion and large investments are fuelling domestic demand. The capital controls introduced during the financial crisis are being lifted.”

The goal of the restrictions was to keep assets from fleeing the country, but some argue the country has the growth to keep their commitments to investors. An op-ed by former State Department official James Glassman last month stated the country could easily allow all the foreign bondholders to exit by trading in their bonds at a fair exchange rate.

Some critics see the policies as far worse than just a lousy exchange rate. The Economist reported that a group of foreign investors accused the country of essentially defaulting on its debts. The European Free-Trade Association Surveillance Authority has already received complaints to that extent from frustrated fund managers.

The Central Bank of Iceland’s Monetary Policy Committee is forecasting the country will see further economic gains. Its quarterly economic outlook Wednesday revealed the country is expected to experience a six percent growth in its gross domestic product (GDP) over the next year. Despite Iceland’s claim that it must continue its policy of discrimination against foreign investors, the committee noted that it sees no need to continue building foreign exchange reserves.

Iceland now has new leadership which will likely play a role in where the dispute goes from here. New Prime Minister Bjarni Benediktsson has yet to reveal how he might move forward. Iceland Watch notes the previous government seized on the opportunity to vilify foreign investors, but the new government now has an opportunity to turn that relationship around.

http://www.insidesources.com/imf-rebuts ... rs-policy/

[ROCKMAN]

Sub - Sounds like Iceland has established a new national policy for itself. What shall we call it? Maybe "Iceland first!" Or maybe "Make Iceland great again!" . Hmm, sounds interesting...might catch on in some other countries...like Germany. Who knows where else it might excite a county's citizens.

Of course that might result in a more global rallying cry of "F*ck the IMF". OTOH might be more then a few folks that like the sound of that. Having power is a great feeling. Which is why seeing such power diminish can be equally painful.

[dolanbaker]

Another kick in the bollocks of globalisation.

[Revi]

Iceland uses the most energy per capita, and I think it might be the new huge aluminum smelter on the northeast coast.

Or the other 2 around Reykavik.

https://arcticecon.wordpress.com/2012/0 ... inum-corp/

From the above article:
"the aluminium industry’s total power usage amounted to roughly 73% of Iceland’s total power consumption in 2010."

What do you think?

[ROCKMAN]

Revi - Mucho thanks. Used that stat about Iceland the other day and wondered why. Now I know: "What is notable is that the aluminium industry’s total power usage amounted to roughly 73% of Iceland’s total power consumption in 2010."

Along those lines: a couple of years ago two EU heavy energy consuming companies moved those operations to take advantage of low cost NG.

[Revi]

I think aluminum smelting uses lots of electricity, and there are places on the Canadian west coast where there are smelters driven by hydro plants as well. Iceland doesn't have many people, so the total amount of energy per capita is high, but some of it comes from geothermal and some from hydroelectricity, so it's not high carbon energy at least.