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    #26
    Iceland

    I'm still baffled as to why the citizens of a country should be liable for the failings of a company which has it's HQ there. I understand and sympathise with the view that the people saving in the banks shouldn't be screwed, but why should regular Icelanders pay? I really don;t get it. What's their connection to the excesses?

    Whenever it was (sometime in the 19th Century?) that it was realised that banks going bankrupt was broadly speaking a bad thing, because of the chaos and the suffering of ordinary people in the collapse, it was in a period in which these issues were largely contained within a nation. So, if the government of the UK (say) had to step in to prop up a bank, such that the ordinary savers could get their money out at least, then that made some sense. But we don't live in that world any longer, and if we still accept that retail banking is something which needs to be supported beyond the levels that other companies go to the wall, then it needs to be on a different scale than before, I'd say.

    In short I have every sympathy with Icelanders saying - look this isn't our debt, this a debt that these banks failed on, and as such they should be punished, not us. Sell off the assets and distribute it to those who lost out, jail the bankers, seize their assets etc etc. Do whatever it takes to get people their money back, but why punish people who had nothing to do with it?

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      #27
      Iceland

      Because when you nationalize something, you own its liabilities, too.

      It's also an issue of fair treatment. If I understand the story right, Landsbanki tried to operate in the UK while only being subject to Icelandic regulations. Then, when the crunch came, the new owners of the bank (the people of Iceland) tried to only provide deposit insurance to the bank's icelandic clients, not its foreign ones.

      You ask why citizens of a country should be liable for the failings of a company just because it's HQ is there - one might equally ask why some depositors get treated differently just because they have a different passport.

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        #28
        Iceland

        You might also ask why depositors with a different passport opened an account with a bank in a country that they had no relationship with. The reason is because it provided higher returns. People* were happy to take those higher returns without taking into account the risks with deposits in the bank.

        *Reality in most cases is that pension companies etc. were the ones placing the money on deposit rather than individual depositors

        Even if you accept that depositors get treated differently just because they have a different passport is wrong (I would have sympathy with the argument) it is a drop in the ocean compared to the liabilities. The main issue is taking on of liabilities from private commercial concerns to the national balance sheet. I can see that legally you are obliged to take on everything if you nationalise but I cannot see how it is fair and just to the ordinary citizen.

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          #29
          Iceland

          but also myself, figuring that since many people i knew could apparently afford not only insanely expensive houses but also cars and other things, i must be an economic underachiever. only now do i understand that many people's lifestyles were based on borrowing.

          the main reason i didn't buy a house was not that i saw through the bullshit and predicted a crash (though i do give thanks that i had, years before, read a thing in the economist about the japanese property market, which demolished the cliche about bricks and mortar being the most solid of investments with a single inverted-V graph). the reason was that i was reluctant to borrow a large multiple of my annual earnings to live somewhere worse than i could live if i stayed renting. it seemed too risky, and a bad deal besides.
          This. Absolutely this. P and I earn what I consider to be a very decent amount of money between us. But I don't think I could (or would want to) afford to run a flash car. Even a relatively cheap car is ten grand. I've never spent that on anything in my life. I see people lashing out 3 or 4 grand on a new kitchen and I think "how can you afford to do this? How do you have 3 or 4 grand just hanging around to spend?" I get to the end of the month about even and I don't think I'm that profligate. And people do this on one income while paying for their kids too. I don't get it.

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            #30
            Iceland

            I don't see in this situation why the British and ther Dutch should pay, however bitter a pill it is for the Icelandic population
            British savers moving their money to Iceland for better interest shouldn't be able to rely on the Brit government (ie, the rest of us) guaranteeeing their losses, surely?

            * of course I realise many of these 'savers' are actually corporate pension funds and the like...

            (posted before reading EWN's above)

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              #31
              Iceland

              Antoine Gramcy wrote:
              Aren't you missing a zero there (50 billion euros divided by 300 000)?
              This is where I got my working repayment figure. 3 billion pounds. Is it wrong?

              Comment


                #32
                Iceland

                hobbes wrote:
                This. Absolutely this. P and I earn what I consider to be a very decent amount of money between us. But I don't think I could (or would want to) afford to run a flash car. Even a relatively cheap car is ten grand. I've never spent that on anything in my life. I see people lashing out 3 or 4 grand on a new kitchen and I think "how can you afford to do this? How do you have 3 or 4 grand just hanging around to spend?" I get to the end of the month about even and I don't think I'm that profligate. And people do this on one income while paying for their kids too. I don't get it.
                Trust me when I tell you that I'm one of the cheapest people you know, and three or four grand is hardly 'lashing out'. Twenty grand is lashing out. 3 or 4 grand is an IKEA DIY job with a couple of new appliances, which is how we did it 9 years ago and that's roughly what it came to without your fancy granite countertops and SubZero branded whatnot.

                Comment


                  #33
                  Iceland

                  £3bn was owed to depositors. The associated liabilities will be a multiple of that.

                  Comment


                    #34
                    Iceland

                    Ah, okay.

                    Comment


                      #35
                      Iceland

                      Duncan Gardner wrote:
                      I don't see in this situation why the British and ther Dutch should pay, however bitter a pill it is for the Icelandic population
                      British savers moving their money to Iceland for better interest shouldn't be able to rely on the Brit government (ie, the rest of us) guaranteeeing their losses, surely?

                      * of course I realise many of these 'savers' are actually corporate pension funds and the like...

                      (posted before reading EWN's above)
                      Weren't there rather a lot of local authorities with money in Iceland? I got the impression they'd been encouraged to put it there by central government.

                      No doubt most of you have seen this. Daniel Hannan, "who became an internet sensation when he exposed the failure of Gordon Brown", praising Iceland in 2004.

                      http://www.nextleft.org/2008/10/dan-hannans-icelandic-utopia.html

                      I know I shouldn't, but part of me wants austerity till the pips squeak for Iceland, just to rub Hannan's nose in it more.

                      Comment


                        #36
                        Iceland

                        hobbes wrote:
                        but also myself, figuring that since many people i knew could apparently afford not only insanely expensive houses but also cars and other things, i must be an economic underachiever. only now do i understand that many people's lifestyles were based on borrowing.

                        the main reason i didn't buy a house was not that i saw through the bullshit and predicted a crash (though i do give thanks that i had, years before, read a thing in the economist about the japanese property market, which demolished the cliche about bricks and mortar being the most solid of investments with a single inverted-V graph). the reason was that i was reluctant to borrow a large multiple of my annual earnings to live somewhere worse than i could live if i stayed renting. it seemed too risky, and a bad deal besides.
                        This. Absolutely this. P and I earn what I consider to be a very decent amount of money between us. But I don't think I could (or would want to) afford to run a flash car. Even a relatively cheap car is ten grand. I've never spent that on anything in my life. I see people lashing out 3 or 4 grand on a new kitchen and I think "how can you afford to do this? How do you have 3 or 4 grand just hanging around to spend?" I get to the end of the month about even and I don't think I'm that profligate. And people do this on one income while paying for their kids too. I don't get it.
                        I'm in the opposite situation to you. To rent my house would cost approximately 2.5 x what I pay on my mortgage and if I paid my monthly mortgage on rent instead, I would have to downsize from a three bedroom house with a garden to a one bed flat without. I honestly don't know how people can afford to rent these days. Renting in London has always seemed insanely expensive to me. Fifteen years ago buying was the cheaper option and so it made sense to do so.

                        It's all about timing though. If you were a few years older, had met your partner a few years earlier, you might have thought about buying somewhere together when property wasn't so expensive. I was lucky on both counts, and I stress the 'luck' element because there's no other word for it.

                        Comment


                          #37
                          Iceland

                          Worn Old Motorbike wrote:
                          Antoine Gramcy wrote:
                          Aren't you missing a zero there (50 billion euros divided by 300 000)?
                          This is where I got my working repayment figure. 3 billion pounds. Is it wrong?
                          I thought you were referring to external debt as a whole. Carry on.

                          Comment


                            #38
                            Iceland

                            Ek weet nie wrote:
                            I can see that legally you are obliged to take on everything if you nationalise but I cannot see how it is fair and just to the ordinary citizen.
                            Fair enough. Then don't nationalize.

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