that's a copout if i ever heard one. you don't win debates by saying that someone is not considering the issue rationally. then you finish the debate off by saying let's leave it that. your reasoning makes me think that you are odds on the product of a feely good american education which is known to have no substance.
I am going to have to dissent on this... Firstly, the author of the paper you cite sits on the MPC of the Central Bank of Iceland, so I do believe she's biased. Secondly, what she's describing is a very one-sided and convenient interpretation of the directive. Sure, it's a possible interpretation, but to claim it's the only one would be absurd. Thirdly, yes, the mechanism by which the depositor protection schemes are implemented is a fund administered by the national govt. Whose fault is it that the fund had no foreign-ccy assets, while the banks that were supposedly being "regulated" and "insured" had massive foreign-ccy liabilities? Ultimately, my point is this. No matter how you slice it a very large portion of the blame for letting sh1t get so out of hand rests with the Icelandic authorities (the govt, the Central Bank, etc). Who should pay for the mistakes committed by a democratically elected government, in your opinion?
I don't know about rational. I am however being realistic. Can you state any other consequences for Iceland if they renege apart from being denied EU membership? I don't think that's of any significant consequence. I'm sure Ireland wishes it never signed up!
they will send the royal british navy, to punish those vikings, while merrily singing Rule Britannia Britannia rules the waves. RULE BRITANNIA LYRICS When Britain first, at heaven's command, Arose from out the azure main, Arose, arose, arose from out the a-azure main, This was the charter, the charter of the land, And guardian angels sang this strain: Rule Britania! Britannia rule the waves. Britons never, never, never shall be slaves. Rule Britannia! Britannia rule the waves. Britons never, never, never shall be slaves. The nations, not so blest as thee, Must in their turn, to tyrants fall, Must in ,must in, must in their turn, to tyrants fall, While thou shalt flourish, shalt flourish great and free, The dread and envy of them all. (Chorus) Rule Britannia! Britannia rule the waves. Britons never, never, never shall be slaves. Rule Britannia! Britannia rule the waves. Brittons never, never, never shall be slaves.
Martinghoul, that is a fine rebuttal...the article writer is defending her own book. I did not say that the argument was dispositive. I suggested that it had a reasonable legal basis...which you don't seem to refute. My point is that there is a basis to argue. You should also consider that the normal notions of contract obligation don't really apply in the inescapable reality of insolvency. If you contract to pay, and you can not pay; then you cannot pay, even if you should pay. The whole idea of bankruptcy as a process was based on the moral imperative to avoid slavery or indentured servitude. Debts are discharged in a bankruptcy so long as their is no fraud. It is unfortunate but society has decided that allowing a clean slate to begin again is better than debt slavery. I understand that the issues of sovereigns are different from bankrupts...technically sovereigns cannot be bankrupt becuase bankruptcy is a legal proceeding of a sovereign. However, there is a long history of sovereign default. Spain made spectacular default in spite of all their Inca goldl. Greece was serial defaulter before it joined the EMU...and I dare say there are not done yet. Argentina is good a default, along with Russia. There are many examples of sovereign default throughout history...so why is Iceland's potential default, even with arguable color of legal disagreement so unthinkable? The money that was lost was at risk and much has been paid back and more will be paid back from the unwinding of the banks...you konw that the U.K. froze the Icelandic bank assets when the default occurred...they will get some recovery there...In the end the Icelandic people have to decide how much debt slavery they want to endure in thier future...which is the bigger burden, recovery from a default or recovery from an overbearing performance? Just for a little perspective (Speaking of my frame of reference for the U.S.) it was not unit the 1930's that bank deposits were guarateed at all...and not until the 1950's and 60's that there were insured in significant amounts. Prior to that time depositors had to choose thier banks wisely..and banks rarely paid interest on deposits...they attracted them because thier balance sheets were so strong that was where people wanted to keep thier money safe. The socialization of the deposit risk was a major factor in the leveraging of banks...the competitive edge of super solvency turned into a liability when the guaratee went to the government. Prior to government guarantee the bank directors and shareholders were subject to double liability...they would loose thier equity and they would be called to put up an equal amount of their lost equity as damage to pay depositors in the event of default. Because of these risks the banks did not generlly make real estate loans and other long risk obligations that could not be made liquid in a run. Banks generally held reserves against deposits of much more than 30% and they generally had commercial paper, government securities and gold far in excess of deposit liability. The system that evolved to today has banks holding reserves less than 8%...now being raised to 8%. Where the larger banks stood behind the smaller correspondent banks we know have the governments standing behind the banks. It makes sense as an international investor to look at the government that stands behind the bank and decide how valid that guarentee can be. Small governments like Iceland, Ireland, Estonia...and larger governments that are so poorly run like Greece and Portugal really have no capacity to guarantee thier banks...law, EEA, EU...not withstanding...if you can't pay, you can't pay. Germany and England and France might not like to admit it but there is a limit to the amount that they can guarantee, standing behind Greece and Ireland and Portugal and Spain and thier banks...at some point, somebody has got to stand up and say the Emporer has no credit, he's a naked risk, and your speculative investment has been lost.
Not so for graduates of US institutions of higher learning that accepted student loans to finance their education. If they cannot pay off their loans, that debt is not dischargeable in bankruptcy and is a black mark on their credit record for so long as they shall live.
Thx for sharing. It's only after they crossed the gate of hell that they start to think... bye bye ^^