Human Action upgrades Iceland to investment grade

An extraordinary development is occurring in the tiny island nation of Iceland. The first sovereign casualty of the financial tsunami that occurred during the onset of the global economic crisis in 2008, Iceland underwent a fiscal meltdown and currency collapse when its 3 largest banks became insolvent. A neo-liberal government allowed Iceland’s financial industry to go global amid an environment of deregulation. The result was that Icelandic banks held more deposits from foreigners than from the nation’s citizens. When the global economy went into a nosedive, the three banks were rendered utterly insolvent, with liabilities exceeding the GDP of Iceland by a multiple of ten.

The national currency, the krona, collapsed. The government was forced to nationalize the three banks, go to the IMF for emergency loans, then resign as the population of Iceland erupted in a massive display of civil disobedience. A new government came to power, seeking to responsibly cope with the profound financial disaster that has engulfed Iceland. However, the governments of the UK and the Netherlands, which had reimbursed citizens who lost their deposits in the Landsbanki, which had enticed them with above market interest rates through a program known as Icesave, demanded that Iceland assume full financial liability and pay back those governments. Desperate to enter the European Union and receive additional IMF help, the government in Reykjavik felt it had no choice but to agree to compensate London and the Hague, to the tune of $6 billion, payable over 15 years. This would mean that every one of Iceland’s 300,000 souls would be responsible for paying the British and Dutch governments $20,000. The Icelandic government has told its citizens that there is no choice: either abide by the agreement or accept isolation from the global financial system, junk bond status in sovereign debt markets and a termination in loans from the IMF.

The citizens of Iceland have reacted with a petition containing the names of 25% of the nation’s registered voters, opposing the agreement. In response, Icelandic President Ólafur Ragnar Grímsson announced that he would not sign the agreement as approved by the nation’s parliament, and would instead call for a national referendum. Current projections are that 70% of the voters would reject the agreement.

Human Action calls on a round of applause for the people of Iceland! They’re showing up the sheeples of the rest of the world in fine form. Better late than never - perhaps if the citizens had said they don’t care about the country’s credit rating in the first place, they would never have been led into this mess by their government and bankers. In that case the big Icelandic banks and government debt would have been a less ’safe’ place for foreigners to invest and save, and the precarious financial and monetary state of the economy would never have come into being. This would also have forced some fiscal and monetary prudence onto the Icelandic government. It is blatantly clear why the rating agencies initially did more harm than good, and we expect the consensus to catch on soon.

Iceland as seen from space, NASA

This also counts for other countries, but most importantly, the US. Apart from lacking the luxury of being able to print the global reserve currency, what makes Iceland so different from the US? The US government has bailed out more banks than the Icelandic government. The US government’s unfunded liabilities are also in the region of ten times its available capital. The US government is repaying its creditors with an inflated currency, i.e. meaning they are technically defaulting. The people of Iceland are being honest about their default, as they have cottoned-on to what their government and bankers are doing. The US government is stealing the money for their default from their creditors, and one of the main reasons why the US dollar will fall seriously out of favour in the not-too-distant future. Human Action would go as far as to say that the willingness of Iceland’s president to listen to his people and not take another IMF loan to bail out bankers and government deserves a credit rating upgrade, not a downgrade!

Footnote: What is also interesting is that the US public’s sentiment is very similar to their Icelandic counterparts: according to polls, 79% of Americans support an audit of the Federal Reserve, which will be the first step for Ron Paul to one day reach his 30-year long mission of dismantling the Fed entirely, which would put an end to these lunatic asylums around the world: central banks.