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Wherein one admits one was wrong

by r------ Mon Feb 20th, 2012 at 04:37:23 PM EST

At the beginning of the financial crisis, in 2008, many of us could see what was coming, at various speeds we many of us came to similar conclusions concerning the mess our respective economies were going to find themselves. And as we came to similar conclusions albeit at differing speeds, the lag between those speeds gave rise to some occasionally ill-tempered discourse. I recall in particular, in viewing the fallout from Lehman, seeing aggregate demand plummet nearly immediately, and globally (I direct the planning and analysis department of a medium-large multinational whose topline, statistically-speaking, tracks GDP growth nearly in real time, with a beta of a bit more than two).

Many subjects were covered, starting back then - stimulus (we were already talking about this in the fall of 2008!), the coming unemployment crisis (I think I called Spain's 20+% unemployment rate back in September 2008, it was around 10% then), banking reform, Iceland, Ireland...and later, Portugal, Greece, et c....and it is fun to watch the arguments rehashed over and again. Of late, those arguments have been spiced up by some German contributors who've dutifully repeated for us German economic conventional wisdom, but this is just the latest chapter in the saga...

But I read something today which gave me pause:

 



Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country's economic and financial collapse are reaping the benefits of their anger.

Since the end of 2008, the island's banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.

"You could safely say that Iceland holds the world record in household debt relief," said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. "Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that."

Now, I've been seeing many commentators praising the Icelandic solution, not least of which has been Paul Krugman, in article after article, a solution which put the people first before the banks, perhaps the only place (so far) where this has been the case since the beginning of the lesser depression. But, as some readers here may recall, I have a bit of a history on the subject of Iceland, having been a bit offput by the Icelandic government's refusal to extend guarantees to Dutch and English depositors all the while ring-fencing the deposits of Icelandic depositors. I found this unfair and an abuse of trade priviledges Icelands enjoys under EFTA, thinking that yet again another Enron-style bankruptcy was in the air, with no one held to account, and losses stuck to the little guy with no accountability:


Its economic elites who managed the banks which have bankrupted the country (and make no mistake, the Icelanders are still in denial on this point, but their country is, in fact, bankrupt, playing by normal rules)  were overseen by regulators put in place by the people they elected. And so, any malfeasance is ultimately on the people. Understandably no one wants to admit they put in place people who gambled their money and now they are on the hook for 4 or 6 months salary in debt....but..they are.

If they had taken steps to put some bankers in jail, or better, served them to the English for UK-style Daily Mirror-reported justice, you know, I'd think this a mitigating factor excusing Icelander's shirking of their responsibility...

I was wrong:

Iceland's special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.

Larus Welding, the former CEO of Glitnir Bank hf, once Iceland's second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.

Solitary confinement for bankers. Now there's some good news! Let the practise spread, heaven knows there is a jurisdiction near you which should be saving a very special cell for a high-placed banker.

Iceland, I have to admit, I didn't think you had it in you, and for that, I hope you will accept my heartfelt apologies.

Display:
Frankfurt am Main will eventually be ready, there's got to be a number of penitential facilities near Kaiserstrasse 29...

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Mon Feb 20th, 2012 at 04:45:23 PM EST
If you look at 'the lesser depression" from the perspective of justice, you have a thousand points.

If you look at the financial madness from the perspective of existing power politics, those seeking justice have not near enough clout to cheer the "perp walk" dance.

And even where there are token trials, the result is often a strange form of  absolution.  Milken was left with a mere $125 M after paying $900M, and forbes estimated present worth is $2B. Some token Rich and Heinous.

I applaud Iceland, for finding a way to legitimize the voice of the people, but i'll also wait until the verdicts are in.

As for the land of the Kaiser, fat chance. Wage suppression does keep people skuffling.

(PS. Strong diary, redstar. But let's see how der Schweiz handles UBS.)

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Mon Feb 20th, 2012 at 05:22:40 PM EST
[ Parent ]
I too shall be awaiting those verdicts, though like you I'm not holding my breath for other European countries with the potential exceptions of Greece and Cyprus.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Feb 21st, 2012 at 07:32:17 AM EST
[ Parent ]
According to a poll today, 3/4 of Greeks want George Papandreou to be tried for his role in the catastrophe, and something like 1 in 2 want to previous PM, Kostas Karamanlis tried with him, while a third want to try even Kostas Simitis (socialist prime minister from 1996 - 2004).
Something like 60% of those surveyed answered that current PM Loukas Papademos' sole role is to protect creditors' interests.
It seems that we're heading for elections late April  or early May, as ND leader Samaras has convinced the German leadership that the longer elections are postponed, the worse he'll do- and the better the left will do. It's going to be interesting...

Cyprus has apparently escaped the harsher versions of austerity as they secured a 2 billion euro loan from Russia (that's something like 30% of GDP there).

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Mon Mar 5th, 2012 at 10:15:52 AM EST
[ Parent ]
Cyprus has apparently escaped the harsher versions of austerity as they secured a 2 billion euro loan from Russia (that's something like 30% of GDP there).

I've been (jokingly) predicting that Greece could well survive a default by selling Russia an island on the Aegean to build a naval base, in exchange for essential fuel and food imports to get over the first couple of years of capital market lockout.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Mar 5th, 2012 at 10:20:39 AM EST
[ Parent ]
I've been seriously suggesting that ever since it became clear that Greece would have to go full Argentina.

I did some back-of-the-envelope calculations on the 20-year lease the Chinese bought of a major Greek harbour, and I think they actually paid a fair(ish) price for it. It is a sad day for European solidarity when Beijing gives European states better deals than Bruxelles.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 5th, 2012 at 11:34:20 AM EST
[ Parent ]
There is no such thing as European solidarity, only a race to the bottom. Didn't you get the memo?

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Mar 5th, 2012 at 11:39:19 AM EST
[ Parent ]
You have to love all these countries like Cyprus with their shadow banking systems of which countries such as Russia avail themselves.

Then there are the nations with oil resources that pay for pensions, and still others that play offshore tax haven such as Luxembourg.

You have tiny little duchys carved all over Europe fulfilling one function or another.

by Upstate NY on Mon Mar 5th, 2012 at 03:46:50 PM EST
[ Parent ]
countries like Cyprus with their shadow banking systems

See here for more on that about Cyprus.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Mar 5th, 2012 at 04:27:51 PM EST
[ Parent ]
Milken was left with a mere $125 M after paying $900M

I believe wiki said he paid a total of $1.1 billion in fines and restitution and I recall he also sheltered $600 million in the Milken Foundation. In Deep Capture, (no longer available due to lawsuits), Mark Mitchell alleged that, among other activities, Milken was involved in manipulation of bio-tech stocks through naked shorting of promising companies, much of it through a Bernie Madoff company which held a position as a 'market maker' on some exchanges that allowed it to engage in naked shorting via a market maker exception to SEC and other regulatory rules. According to Mitchell Madoff may have covered some of his losses from the naked shorting with money from some of his investor marks.

The point of the manipulation, in part, was to inhibit the emergence of real solutions in order to keep alive highly profitable pump and dump activities with various doomed companies. Of course Mark Mitchell is now portrayed as a rogue journalist who went off into the deep end, the shallow end being where the MSM carefully stays. Too bad the resolution of these allegations may have been determined by the relative size of the bank accounts involved.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Feb 21st, 2012 at 09:35:09 AM EST
[ Parent ]
What most of the bankers ion London and the US don't realise yet is that liberally deployed jail time may end up being the only thing that will keep them alive.

The elites are testing the greeks' patience, I doubt it will work for much longer

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Feb 20th, 2012 at 05:23:55 PM EST
we get to critical mass, though that point has perhaps approached well enough in Greece for something good to give.

Germany and its supporting countries still have resources even if they are loathe to put them to use. I expect the crisis to play out slowly for some time yet.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Feb 21st, 2012 at 07:30:58 AM EST
[ Parent ]
I actually was fairly sure that they would try to prosecute, but expected the culprits to get away in time. What are extradition prospects, if any of then do leave Iceland?
by gk (gk (gk quattro due due sette @gmail.com)) on Mon Feb 20th, 2012 at 05:38:25 PM EST
Reading this paper - Nordic Cooperation and the European Arrest Warrant: Intra-Nordic Extradition, the Nordic Arrest Warrant and Beyond by Gjermund Mathisen :: SSRN - I find that while the EAW does not cover EFTA countries (like Iceland) there is a similar Nordic system that predates the EAW.

Googling around Iceland appears to have extradition treaties with states such as the US and Canada, but I can't find a list for Icelands treaties. I am sure that there are states where rich fugitives can hang out. Hope they have got them in custody.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Feb 21st, 2012 at 04:36:15 AM EST
[ Parent ]
fugitives can hang out. And, more importantly, their money.

For the latter, Europe remains quite a good place to park ill-gotten gains.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Feb 21st, 2012 at 07:29:07 AM EST
[ Parent ]
the old PM, thought they were undermining the whole effort by looking overly political. After all, this is not a political crisis, it is a crisis brought about by abuses of the private sector.

So, this is a good start.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Feb 21st, 2012 at 07:27:59 AM EST
[ Parent ]
A political sector bought by corporations.

Align culture with our nature. Ot else!
by ormondotvos (ormond.otvosnospamgmialcon) on Sat Feb 25th, 2012 at 03:02:30 AM EST
[ Parent ]


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