UPDATE Iceland - people take to the streets

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In the year’s leading up to Iceland’s collapse, some of the nation’s largest banks made a last-ditch effort to shore up their capital…by luring in Dutch and British depositors. It failed to stave off collapse, sparked international tensions in late 2008, and it’s now coming back to bite the broken nation just when it hurts the most.

Because British and Dutch depositors – promised a guarantee scheme by the Icelandic government – now want their money back.

To stay in good standing with the IMF, Iceland has to comply with these demands. Lose the good faith of the IMF, and Iceland’s situation could rapidly deteriorate in the next few years. So parliament moved quickly to push a bailout through – getting it passed with a narrow margin of victory (33-30).

But can Iceland even bear the cost of bailing out foreign depositors? We’re talking about $5 billion dollars; or 13,000 euro for every man, woman and child in Iceland.

The historically timid Icelandic people answered with a resounding “Hell no!”

They took to the streets, torches in hand, and made quite a scene. President Grimsson soon vetoed the bailout, sending it to a national referendum and truly letting the people decide.

Now before you respond with your own resounding “Hell yeah!” at seeing the Icelandic people make a stand against bailouts, you should consider the situation…

The bailout might indeed have a crushing effect on their economy in the short-term…but Iceland is going to need the IMF in a big way over the next few years. Without their assistance, Iceland could be on the express train to the third-world, relinquishing what remains of the benefits of their own economic liberalization.

And this President isn’t a knight in shining armor either…

In the history of Iceland’s current government (since 1944), he’s the only President to have used the veto power. This is his second time…the first was back in 2004, when he vetoed a law that would’ve prevented a member of his party from setting up a media monopoly. So this isn’t necessarily a black-and-white situation.

And according to Thomas, Iceland’s population is truly considering the ramifications of the veto. “Back when he originally issued the veto, the President had an approval rating of 75%,” Thomas told us, “but as of today, that’s dropped to 50%, mostly on foreign pressure leading up to the referendum.”

Iceland’s people are gradually realizing the reality of their situation. When it comes to this bailout; they’re damned if they do…and they’re damned if they don’t. They’ve reached the point where there’s no more sticking their head in the sand.

British and Dutch depositors may indeed get their bailout, but there’s no bailing out the fate of the country at large. No more “do-overs.” Not anymore at least. The piper has come, and he demands payment.

And the rest of the Western world surely isn’t far behind…

In a logical world, they would allow the bank to simply collapse.

Allow the government to collapse.

And then tell the IMF to take a hike.

Then you could start over and create a debt free government and BAN taking LOANS from anyone.

And pass regulation banning the banks from issuing more funds than they have in their vaults as loans.

A 5 step plan to independence and freedom.

But, I am betting they will just get on their knees to the IMF and beg for forgiveness or whatever.

I wish the Icelanders were all crazy and willing to fight this tooth and nail.

This is essentially the difference between Freedom and Slavery for Iceland. No Joke!

[edit on 12-1-2010 by muzzleflash]