Elaine Meinel Supkis
Iceland is falling down the old rabbit hole. They were tempted to go to infinity and now the system is resetting to zero! I remember some of the online pundits who are more popular than I, touting the krona of Iceland as a great currency. Selling Iceland as a great place to park money to protect it from the ravages of the US empire's financial collapse. But...as I keep on pointing out, THERE IS NO SAFE HARBOR WHEN A GREAT EMPIRE COLLAPSES! We must instead, build our communities and our families so they are strong enough to withstand the coming storm. Or we can listen to History who tells us happily, how revolutions, wars and other things naturally spring from similar circumstances.
Iceland's lenders are under attack from what its central bank called ``unscrupulous dealers'' amid concern reliance on foreign funding may undermine their operations.
The cost to protect the country's biggest lenders from default is the highest of 81 banks worldwide with credit-default swaps listed on Bloomberg. The country's benchmark index of stocks has shed 20 percent this year, while the krona has lost almost a quarter of its value against the euro.
``The longer this goes on, the worse it gets,'' said Olivia Frieser, a London-based bank analyst at BNP Paribas SA, France's biggest lender. ``It is a question of confidence.''
Iceland's banks have expanded outside of the $16 billion island economy by taking on more borrowing. They account for about 80 percent of the country's gross external debt, which is five times gross domestic product.
``Iceland has been likened to a hedge fund because the banks borrowed to invest in equity,'' Paul Rawkins, a senior director at Fitch Ratings in London, said in an interview. ``It was a punt on getting higher returns to pay off the debt. They are exposed now, and sentiment has shifted against them.''
All the world's tiny kingdoms, republics and dependencies have sought to turn themselves into pirate coves and tax havens. They found the Golden Goose and hoped to haul in much of the planet's wealth and like the huge investment banks, skim this for money to keep for themselves. This game has utterly and totally warped the globe's financial flows and as each year passed and more and more tiny entities played this destructive game, the more many bigger and bigger ones tried to join in the game. So miniscule postage-stamp sized detritus of the great European Empires thrived the last 20 years under the generous umbrella of the US naval empire.
This cute little game of intercepting wealth and parking it well outside of the larger nations and in particular, the huge, expensive American Empire, is directly responsible for a good portion of the present banking system collapse. Of course, the financiers and powerhouses of the US are directly responsible for this situation because they are the ones who persuaded most of these postage stamp entities, they would be most useful if they become a tax haven! The super-rich wanted these tiny tot sovereign nations as pirate coves and home bases for hiding their wealth. Once these places were set up, the rich poured in much of their wealth and thus, sent all the larger nations spiraling into deeper and deeper debts or higher and higher taxes. Due to bizarre notions about sovereignty and alliance, the rich who control the US government have managed to keep their private pirate coves free and clear of any interference, large or small.
The methodologies of the wealthy tax cheats in the US and Europe had a huge impact on these formerly very poor micro-countries. Many of them subsisted on fishing and some grazing animals. The Falkland Islands, Shetland, Jersey Islands, the Isle of Man, just for example, were of this sort. These backwaters became the Fountain of Wealth overnight. It is no surprise to me to see Iceland and Ireland do the same.
As the bag men for the very rich showed up at everyone's lonely shores, armed with great plans for setting up this marvelous alternative banking system, how could these poor fishers and herders say no? Of course not. They all jumped in with both feet.
Part of the dynamics of the total collapse of the financial systems of the West is due directly to this diversion of money flow. Instead of enriching the base of finance, it was undermined as money was diverted into the wrong places and in the wrong amounts. The flow started as a mere trickle post-Bretton Woods II. But as they discovered that the US government and certainly, Britain's government was easily corrupted, bribed or manipulated, the activity steadily grew. What was a small nuisance in 1985 grew into the present monster we see today. The previous postage stamp kingdoms like Monaco that subsisted on gambling turned into huge financial trafficking points. Once computers were fully installed within the world bankings system, funneling funny money became very simple. It didn't take much staff or facilities to do this. So some of the biggest modern banking destinations or centers are tiny islands with small offices and only a few computers and a handful of staff.
This strange, insecure, unregulated, ill-conceived system is now the biggest force in world banking outside of a very, very few central banks in Asia. This system is so poorly articulated, mere clerks working overtime in cubicles can warp billions of dollars of world trade values or the profits of many banks just by monkeying around with their computers in creative ways! This is sort of like running global finances using an army of monkeys randomly typing in numbers! 294733900128753.....on and on the numbers tally up. None of this is controlled by anyone sane. The bankers playing this game, unsupervised like naughty boys turned loose to play hookey in a thunderstorm, have happily splashed around, throwing frogs in the air while blowing them up with firecrackers.
Now the system is breaking down due to the numbers taking off and heading rapidly towards infinity. Iceland seems to be one of the first of these entities to go under. Let's visit Iceland to see why it is melting:
Iceland remained under Norwegian kingship until 1380, when the Royal House of Norway died out. Iceland and Norway came under the control of the Danish Crown. Unlike Norway, Denmark did not need Iceland's fish and homespun wool. This created a dramatic deficit in Iceland's trade, and as a result, no new ships for continental trading were built. The small Greenland colony, established in the late 10th century, died out completely before 1500, perhaps due to a lack of resources that were normally provided by Iceland.
With the introduction of absolute monarchy in Denmark in 1660, the Icelanders relinquished their autonomy to the crown, including the right to initiate and consent to legislation. Denmark, however, did not provide much protection for the Icelandic islands which were raided in 1627 by an Ottoman pirate fleet, which abducted almost 300 Icelanders into slavery (The Turkish abductions).
In 1602 Iceland was forbidden to trade with other countries than Denmark, by order of the Danish Government. The Danish trade monopoly would remain in effect until 1854.
In the 18th century, climatic conditions in Iceland reached an all-time low since the original settlement. On top of this, the Laki volcano in Iceland erupted in 1783, spitting out three cubic miles (12.5 km³) of lava. Floods, ash, and fumes wiped out 9,000 people and 80 percent of the livestock. The ensuing starvation killed a quarter of Iceland's population. This period is known as the Mist Hardship (Icelandic: Móðuharðindin).
Note how the King of Denmark locked Iceland into trade! All the empires in Europe did this. This fueled many wars. The point was to take a land captive and then force them to buy things at a great disadvantage. This way, the Kings of even very small empires could live outrageous lives in huge, fancy palaces and do as they pleased. The lack of interest in the lives and deaths of their victims is notorious. People who gain an upper hand over others tend to try for this blessed state of tyranny. Under this despotic rule, a great catastrophe happened which killed over 1/3rd of the people. This is not unusual at all, it is unfortunately, quite common. Note the disinterest of the British Crown or Parliament when the Irish suffered similar decimation under a similar ecological/natural disaster.
Certainly, not very many if any ships sailed from Denmark to Iceland to help. Indeed, all of Europe saw huge crop failures and various crop diseases during this time due to the volcanic activity in Iceland.
The German occupation of Denmark on April 9, 1940, severed communications between Iceland and Denmark. As a result, on April 10, the Parliament of Iceland, Alþingi, elected to take control of foreign affairs, electing a provisional governor, Sveinn Björnsson, who later became the republic's first president. During the first year of World War II, Iceland strictly enforced a position of neutrality, taking action against both British and German forces violating the laws of neutrality. On May 10, 1940, Operation Fork was launched and British military forces began an invasion of Iceland by sailing into Reykjavík harbour. The government of Iceland issued a protest against what it called a "flagrant violation" of Icelandic neutrality. On the day of the invasion, prime minister Hermann Jónasson read a radio announcement telling Icelanders to treat the British troops with the politeness due to guests. The Allied occupation of Iceland would last throughout the war.
At the peak of their occupation of Iceland, the British had around 25,000 troops stationed in Iceland, all but eliminating unemployment in the Reykjavík area and other strategically important places. In July 1941, responsibility for Iceland's defence passed to the United States under a U.S.-Icelandic defence agreement. The British needed all the forces they could muster closer to home and, thus, coerced the Alþingi into agreeing to an American occupation force. Up to 40,000 soldiers were stationed on the island, outnumbering all grown Icelandic men. (At the time, Iceland had a population of around 120,000.)
Following a referendum, Iceland formally became an independent republic on June 17, 1944. Since Denmark was still occupied by Nazi Germany, many[attribution needed] Danes felt offended that the step should have been taken at this time. Despite this, the Danish king, Christian X, sent a message of congratulations to the Icelandic people.
Naturally, the King wanted possession of that which his household had a poor history of stewardship! Also note how the US and England seized Iceland for war purposes! The history of doing this is obvious: no island nation can unilaterally destroy another nation's finances or commerce and not expect military retaliation. This is supposedly why we have our navy, for example. But as I keep pointing out, these tiny principalities are all being used by our own rulers who use them to evade paying their fair share in taxes or being regulated by our own just laws! Naturally, the last thing they want is for us to demand these wonderful pirate coves be closed down!
Iceland isn't a pirate cove, they are their own pirates! They discovered the wonderful utility of being a national bank and exploited this generously. This allowed them to create funny money to infinity. Of course, they tried to keep from that. But every year, the temptation to head off into infinity was an alluring prospect. Impossible to resist forever. So each year, the economic base of their banking system shrank more and more compared to the loans they were creating for themselves so they could go on a buying spree.
Iceland had prospered during the course of the war, amassing considerable currency reserves in foreign banks. The government, led by an unlikely three-party majority cabinet made up of conservatives (Sjálfstæðisflokkurinn), social democrats (Alþýðuflokkurinn) and socialists (Sósíalistaflokkurinn), decided to put the funds into a general renovation of the fishing fleet, the building of fish processing facilities, and a general modernization of agriculture. These actions were aimed at keeping Icelanders' standard of living as high as it had become during the prosperous war years.
The government's fiscal policies were strictly Keynesian, and their aim was to create the necessary industrial infrastructure for a prosperous industrialized country. It was considered essential to keep unemployment down to an absolute minimum and to protect the export industry, i.e. the fishing industry, by manipulation of the currency and other means. Due to the country's dependence both on unreliable fish catches and foreign demand for fish products, Iceland's economy remained very unstable well into the 1990s, when the country's economy was greatly diversified.
Up until the 1990's, Iceland was a working island. People built boats, went fishing, fought over fishing rights, they herded sheep and tapped into the energy of their volcanic forces. They diversified and exploited the education of their people and went heavily into biological sciences, for example. All of this was very good. But as I noted, the temptation to become super-rich playing sovereign wealth games using their hard-earned cash to create infinite loans was their downfall. A small population to keep happy enabled this. Low social overhead, little supervision, many people happy over the thought of all this easy money: temptation personified.
The Cod Wars were a series of conflicts between Iceland and the United Kingdom from the late 1950's to the mid-1970's. The first Cod War took place in 1958 when Britain was unable to prevent Iceland from extending its fishing limits from 4 to 12 miles (7 to 22 km) off the coast of Iceland. The second Cod War lasted from 1972 to 1973, when Iceland extended the limit to 50 miles (93 km). The third Cod War began in November 1975, when Iceland extended its zone of control over fishing from 50 miles to 200 miles (370 km). Great Britain did not recognize Iceland's authority in the matter and continued to fish inside the disputed area, marking the third time that Iceland and Great Britain had clashed over fishing rights. Iceland deployed a total of eight ships: six Coast Guard vessels and two Polish-built stern trawlers, to enforce her control over fishing rights. In response, Great Britain deployed a total of twenty-two frigates, seven supply ships, nine tug-boats and three auxiliary ships to protect its 40 fishing trawlers. While few shots were fired during the seven-month conflict, several ships were rammed on both sides, causing damage to the vessels and a few injuries to the crews.
Events took a more serious turn occurred when Iceland threatened closure of the U.S.-manned NATO base at Keflavík, which, in the military perception of the time, would have severely impaired NATO's ability to defend the Atlantic Ocean from the Soviet Union. As a result, the British government agreed to have its fishermen stay outside of Iceland's 200 mile (370 km) exclusion zone without a specific agreement.[
Iceland was so poor, they were willing to take on the musty, bedraggled British Empire and go to blows over possession of some fish! Of course, one of the biggest entities playing this infinite money game is the moth-eaten Lion of England. Both Iceland and England's currencies shot up in value. Real estate shot up in value. Wealth poured into their coffers and more loans were made based on this surge in wealth! And endless loop around the planet ends with money flowing into these island coffers. And seemingly impossible to stop or change.
To stop the oceans from being fished out, sovereignty must be reigned in
Just as there are a finite number of fishes in the sea, there is a finite level for money creation. When this is violated, instead of there being more fishies or more money each year, suddenly, the spawning of money ceases and the fishes vanish, too! Overfishing like over-lending is hazardous. All the tax haven islands and principalities are in heavy competition with each other to grant favors and allow dangerous money making for the pirates and rulers. In other words, everyone is forced to bid against each other to attract people seeking to channel wealth away from the world's democracies and empires and into hiding places. As these places proliferate, the schemes proliferated. Since a devilish system of money governance that is all about anarchy and evasion as well as fraud can't last long, we are seeing it die a swift death after less than 30 years of growth.
There is a side issue concerning the blow up of volcano Laki:
Most notably, Iceland is the site of the largest lava flow in recorded global history. In 1783, an eruption at a mountain called Laki tore a chain of giant craters in the earth. Besides releasing 2.9 cubic miles of lava and inundating 218 square miles of land, the craters also belched a haze of toxic particles into the air, which was reported as far away as Syria. The poisoned air devastated Iceland's livestock and farmland, contributing to a famine that killed about a quarter of the island's residents.
My very favorite American, Ben Franklin, was in Paris negotiating with the French Crown during this time.
Report of a Geological Society Working Group
"There seems to be a region higher in the air over all countries, where it is always winter, where frost exists continually, since, in the midst of summer on the surface of the earth, ice falls of ten from above in the form of hail... During several of the summer months of the year 1783, when the effect of the sun’s rays to heat the earth in these northern regions should have been greatest, there existed a constant fog overall all Europe and great part of North America. This fog was of a permanent nature; it was dry, and the rays of the sun seemed to have little effect towards dissipating it, as they easily do a moist fog, arising from water..."The cause of this universal fog is not yet ascertained,…: or whether it was the vast quantity of smoke, long continuing to issue during the summer from Hecla in Iceland, or that other volcano…..”
Extracts from Meterological Imaginations and Conjectures, by Benjamin Franklin, LL.D., Fellow R. Soc., and Acad. Reg. Sci. Paris Soc. etc., Communicated by Dr. Percival Read December 22, 1784, to the Manchester and Liverpool Philosophical Society. Franklin was in Paris, France, in the summer of 1783 as U.S. Ambassador to France.
One impact of the Laki gas and aerosols over the U.K. during 1783 was to increase deaths, possibly due to respiratory disorders, as shown by map of distribution of English parishes experiencing “Crisis Mortality”, much-above-average numbers of deaths per month, during the Laki fissure eruption.
The resulting famines, poisoning of farm animals, cold winters and wet summers led directly to the French Revolution. The fatal combination of heavy debts, agricultural collapse and revolutionary thought from the Americans doomed the French aristocrats.
Today, we are watching with fascination as the whirlwind of banking collapse collides with other important historical forces to change the history of humanity. Now, let's visit the central banks of the Great Nations, the G7's top powers:
Note that the 'non-borrowed' numbers went from positive to negative. Note also how the negative numbers rise and rise. And then jump over the moon! And see the Term Auction Credit, the magic window for the bankrupt financiers to use to prop up their failed banks! It not only has lots of billions of dollars pouring out, it too, is going up and up each week. The banking crisis is accelerating, not ending!
The simplistic joy on Wall Street today over the infantile notion that the crisis is over now that the Fed is trying to pass a coup through Congress is pathetic, to put it mildly. This is exactly 100 years after the Fed was created in a conspiracy of the top bankers and financial owners of huge hunks of the American economy. They didn't want to compete, they wanted to CONSPIRE. And now they are CONSPIRING yet again to take even more of our economy and control it FOR THEMSELVES! They have been an abject failure at helping our nation in the past. Now they are openly looting it ruthlessly. Let's visit one of my favorite fellow bloggers:
With the credit crisis entering its ninth month, Bank of England Governor Mervyn King and European Central Bank President Jean-Claude Trichet are on the verge of new steps to spur lending and increase liquidity, say economists at Lloyds TSB Group Plc and Royal Bank of Scotland Group Plc. Interest-rate cuts may be next if the crisis persists.”
Oh dear god! THE GREAT GLOBAL MONETARY EASING is yet to come? I thought we just came off ‘the great global monetary easing’ and that THAT is exactly what got us into this mess in the first place! Correct me if I’m wrong, but wasn’t it absurdly low REAL rates that literally forced the entire financial system to REACH FOR YIELD? That is to say to leverage up using derivatives in a vain attempt to turn something yielding 2% or 6% into something closer to 9%? Wasn’t it the super cheap and EASY access to credit by both individuals and corporations that lead to runaway SPECULATION in hard assets such as REAL ESTATE?
Instead of allowing for an orderly and DESERVED unwinding, de-leveraging and general deflation of this mania, the major Central Banks of the world propose to co-ordinate a new round of monetary EASING? Brilliant. Just brilliant.
“The Fed chairman needs all the help he can get. In addition to lowering interest rates at the fastest pace in two decades, Bernanke has committed as much as 60 percent of the $700 billion in Treasury securities on his balance sheet to expand lending. The Fed has also offered a $29 billion loan against illiquid securities to assist the buyout of failing securities firm.”
HAHAHA. Correct! I bet the Financial Ninja hangs under the rafters, watching these shoguns count their loot. He waits and then springs....