F. William Engdahl - Iceland’s Economic Revolution

Iceland's Economic Revolution - New Eastern Outlook
By F. William Engdahl

Iceland - image source

Icelanders are a proud stubborn people with more than 1200 years of history, rugged Scandinavian stock, living in one of the most beautiful natural areas of our Earth. In 2001 her government made a colossal series of disastrous decisions that resulted in the worst banking crisis in history.

Prime Minister Davíð Oddsson, enchanted with Milton Friedman’s free market ideas, implemented a course of tax cuts, cut the corporate income tax to 18%, abolished the net wealth tax, lowered the personal income tax and inheritance taxes and privatized the banking system, introducing financial deregulation along lines of the United States, for a nation with a population of a mere 239,000 citizens. He also entered a free trade agreement with the EU. Oddsson joined the charmed circles of Bill Clinton, of George H.W. Bush, who was invited to Rekyjavik to go salmon fishing. He became a regular at Bilderberg meetings. It seems it all went to his head.

Oddsson went on to become head of the Iceland National Bank in 2005 where he fed the megalomania of the three deregulated banks by in effect printing money at unprecedented rates, flooding the economy with liquidity, until he was de facto fired in 2009 by an act of parliament in the wake of the worst banking crisis in Iceland’s history.

Since the outbreak of the Iceland banking collapse and economic crisis in 2008, in the wake of the September 2008 US Lehman Bros. crisis, Icelanders, exercising their centuries-long tradition of direct democracy, took to the streets demanding fundamental change.

Oddsson’s pals in the small country’s newly-deregulated private banks had abandoned caution to the winds as they decided Reykjavik was destined to become the new Wall Street, an emerging world financial center.

By the outbreak of the global financial crisis, the three banks had combined assets equal to more than 11 times of the Icelandic GDP. They held foreign debt in excess of €50 billion, compared with Iceland’s gross domestic product of €8.5 billion. The inexperienced Iceland bankers had financed their staggering growth by borrowing on the interbank market mainly from UK and Holland banks.

The government’s main priority was to insulate the nation’s population and economy from the effects of the wanton lending abuses of the three banks, something the present Greek government was elected to do for its citizens, to the horror of German Finance Minister Wolfgang Schäuble and others. By November 2008 Iceland’s unemployment had tripled in a matter of two months.

Decisive action

When the dust settled, relative to the size of its economy, Iceland’s systemic banking collapse ranked as the largest experienced by any country in economic history. By the October 2008 the country’s three major banks–Glitnir bank, Landsbanki and Iceland’s largest bank, Kaupþing were placed into state receivership, nationalized.

That was the same time US Treasury Secretary Henry Paulson, who deliberately triggered the Lehman crisis, categorically refused nationalizing the criminal Wall Street banks, contemptuously stating, “Nationalization is socialism; we don’t do that here.” It was a lie at best as Paulson, with carte blanche control over an unprecedented $700 billion Troubled Asset Recovery Fund, bailed out AIG, Goldman Sachs and his old buddies on Wall Street with “socialized” losses dumped on American taxpayers.

Unlike Greece or Ireland or other EU countries or the USA, the Iceland Parliament and government refused to give unlimited state guarantee to save the private banks.

They nationalized them instead, creating a “Good bank-Bad bank” model loosely based on the successful Swedish 1992 experience with Securum. All domestic assets of the three banks were placed in new publicly-owned domestic versions of the banks. All foreign liabilities of the banks, which had expanded with subsidiaries in the UK and Netherlands, went into receivership and liquidation. British and Dutch bank counterparties and governments shrieked howls of protest, threatening Iceland with being blackballed and forever cut off from further credit by the world. The government also imposed currency controls.

The Parliament established an Office of Special Prosecution to investigate allegations of criminal fraud by government and bankers. People responsible went to prison. Baldur Guðlaugsson, Permanent Secretary of the Ministry of Finance went to prison for insider trading; the president of Glitnir bank went to prison for tax fraud; the president of Kaupthing Bank got 5 ½ years prison; former Prime Minister Geir H. Haarde was indicted.

Iceland decided to go it alone and focus on rebuilding her devastated real economy. The results are quite opposite the results in the EU where the brutal IMF and ECB and EU austerity policies have turned a banking crisis into a major economic crisis across the EU.

By March 2015, according to the IMF itself, “Overall, macroeconomic conditions in Iceland are now at their best since the 2008-9 crisis. Iceland has been one of the top economic performers in Europe over the past several years in terms of economic growth and has one of the lowest unemployment rates… Iceland’s strong balance of payments has allowed it to repay early all of its Nordic loans and much of its IMF loans while maintaining adequate foreign exchange reserves.” The report added, “This year, Iceland will become the first 2008-10 crisis country in Europe to surpass its pre-crisis peak of economic output.”

Revolution in banking next?

The most dramatic and heartwarming development from the Iceland financial crisis however is the Prime Minister’s proposal to revolutionize the country’s money creation process. The first country in the present world to consider such bold action, Prime Minister Sigmundur Davíð Gunnlaugsson commissioned a major report, on reform of the monetary system to prevent future crises. The report, issued by Progressive Party parliamentarian and chair of the parliament’s Committee for Economic Affairs and Trade, Frosti Sigurjónsson, examined the very taboo subject of how private commercial banks are able to create money “out of thin air.”

The report considers the extent to which Iceland’s history of economic instability has been driven by the ability of banks to ‘create money’ in the process of lending.

They went to the Holy of Holies of the secrets of banking since the Bank of Amsterdam first introduced systematic fraud into credit lending in the late 1700’s before it went bankrupt—fractional reserve banking. That simply means a bank lends many times over its deposit or equity base. If there is a crisis of confidence and depositor bank runs, under fractional reserve banking, the bank goes under.

The Frosti report concluded its examination of the link between Iceland bank lending up to September 2008 and the severity of the crisis. Their conclusion was that, “the fractional reserve system may have been a long term contributing factor to various monetary problems in Iceland, including: hyperinflation in the 1980s, chronic inflation, devaluations of the Icelandic Krona, high interest rates, the government foregoes income from money creation, and growing debt of private and public sectors.” That’s a strong indictment and accurate.

It described the stages of every bank crisis since at least 1790 when the Bank of Amsterdam went bankrupt after a run: “A bank’s stock of cash and Central Bank reserves (both assets of the bank) is small compared to total deposits (the banks’ liability). A rumor that a bank may be in difficulty can therefore cause customers to withdraw their deposits in panic (a bank run). A bank run forces the bank to sell assets quickly to fund payouts to depositors. Such a sudden increase in the supply of assets can lead to a fall in market prices, putting other banks into trouble, and the whole banking system may follow.”

Sovereign Money System

The report to the Prime Minister concludes that a revolutionary change in control of credit is needed to control the greed and voracity of the private banks. They call for something known as a Sovereign Money System.

To read more including Iceland's simple and effective solution, click on the link below

Iceland's Economic Revolution

Image source and a little more background - Icelandic People Take Back Government. Refuses to pay international debt!

YES!!! smiling


thank you James

Nice to read something positive once in a while! I've been really getting depressed reading a lot of vaccine and GMO nonsense lately. Hope you are doing great!

Hi Joe

It is so refreshing when people reject the fear and bullshit and act out of common sense as in the case of the Icelanders. In the end, it really can be a case of, "just say no!"

McJ's picture

Hi Joe, Hi James I agree. It

Hi Joe, Hi James hello or goodbye

I agree. It is nice to read some good news!
Go Iceland. cheer

The vaccine news is really depressing. The pro vaccine crowd is certainly a righteous bunch.

Did you catch the story about the tetanus vaccine being giving to millions of women of child bearing age in Kenya? It is contaminated with a sterilization chemical that causes abortion.

Tetanus vaccines found spiked with sterilization chemical to carry out race-based genocide against>/a>

And there is this:

Could a Tragic chapter of Australian history be unwittingly repeated in a seasonal 'Flu Vaccination Campaign' for First Nations childtren?

Hi McJ - thanks

thanks for the links - more depressing reading, yay! smiling

In Washington and Oregon, new laws furthering vaccine mandates for kids were shot down, but in California SB277 is progressing, through 2 committees so far, one more next week, then the general assembly and the governor's desk. I wonder if they'll kick kids out on January 1 in the middle of the school year, or wait until the fall. Of course I tend to think it's all about the money and the lobbyists buying whatever votes they need to make this market grow.

To me it's absurd that they're mandating chicken pox vaccine - without that, you will no longer be allowed in public schools, and tetanus - mandated, for heck sakes it's not even contagious and you'll get another shot anyway if you step on a rusty nail. But without it, no public school admission. And any other vaccines they later dream up and deem necessary. And kids are only the forefront, mandates for adults coming soon!
It's clear their goals are not limited by state or national boundaries. now i really feel like "Debbie Downer" smiling

Best wishes to all.

I think the move to make

I think the move to make vaccinations mandatory for school attendance in the U.S. and for social welfare payments in Australia not only exposes the psychopathic nature of the tptb but also shows how desperately afraid they are of losing their vaccination weapon.

What is even more telling for me is that no one connected with the campaign against vaccines (as far as I know) is making the point loud and clear that if you believe that vaccines give you protection from disease then you don't need everyone else 'protected', too.

It follows then that if these pro vaccine demons and dunderheads maintain that everyone needs to be vaccinated, then either the vaccines do not give the recipients immunity because they don't work or there is another agenda in play which they do not want to reveal. Or both.

The logic is simple and clear. So why aren't the anti-vaxers pushing this simple and effective argument??? Is this yet another case of a 'controlled opposition' leading another 'reform campaign'.

More from William Engdahl -

demons and dunderheads

That's a very accurate description of the mob pushing for mandatory government injections, "pro vaccine demons and dunderheads" thanks James

McJ's picture

Conversation stopper

"What is even more telling for me is that no one connected with the campaign against vaccines (as far as I know) is making the point loud and clear that if you believe that vaccines give you protection from disease then you don't need everyone else 'protected', too."

I have made this point myself on a few occasions. It's a real conversation stopper. Whoever is pushing the pro vaccine arguments just doesn't know how to respond. It seems to piss them off and can provoke ad hominem attacks. Mr. Green

This a good article on the tactics being used by vaccine promoters. Not that any of this would be a surprise to any of us here but the article is well laid out and well sourced.

First they came for the Anti-Vaxxers

And off the vaccine topic but in keeping with James' good news post. Here is something positve!

CEO Who Set Minimum Wage at $70K is Swamped With Business Now

oh in 'merika they know how to respond

the common argument we hear in the media is that we must vaccinate our children to protect those who can't be vaccinated: children too young for MMR, old folks too frail, and immuno-compromised of all ages. It is to protect these that we are told we must sacrifice a (tiny?) percent of our children to the demon of vaccine-injury.
Or course it's baloney since recently vaccinated can be a danger to these folks. As can of course more common illnesses. But that hasn't stopped this thread of logic from angering the dunderheads.

McJ's picture

Logic and baloney

Following that type of logic, we should be isolating all the immnocompromised and frail people because they are our putting the rest of us healthy people at risk of catching some other disease for which we can't be vaccinated. And as the live measles virus is being shed for up to three months after being vaccinated and is more dangerous than wild measles, shouldn't these people be isolated for at least that period of time? But then, I don't think logic figures into the equation with the demons and dunderheads.

Hi McJ

Thanks for the links. I don't think there is anything 'unwitting' in any of these criminal vaccination campaigns. The genocidal pattern is all too clear.

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