Roark, it appears that the framers of the U.S. Constitution and the evolution of the Common Law had a more jaundiced view of debt slavery than our modern government does....if you default on a government guarantee as a citizen then, you get no clean slate, you remain a slave to that debt anyway...I guess you should look carefully at the value proposition on your eductation investment. A $200,000 non-dischargeable debt for a degree in Art History might not be a smart move.
Lending to Icelandic was so obviously dumb that anyone moaning about the losses should be crucified in public. Good for the Icelanders for refusing to let criminally negligent public officials and financiers try to get their grubby hands in their pockets. Sheep deserve to be sheared; free men refuse to kneel to incompetent bureaucrats.
There is no such thing as a speculative investment. That's like calling a woman a sexually-experienced virgin. I agree about deposit insurance and socialisation of risk. Deposit insurance on such high amounts if clearly fraudulent, because there is literally no ability to pay it if needed. Mass fraud is mass crime. If you rob one person of their life savings, you do 5-10 years inside. If you rob 10 or 50 or 300 million people, you should therefore do life without parole, pretty obvious really. Deposit insurance also encourages reckless leverage and lax lending standards, which whilst not criminal, is clearly harmful and stupid. It penalises conservative, well-managed banks, and forces a 'race to the bottom'. Classic example of moral hazard, even a 1st year econ grad can understand that. Deposit insurance basically forces politicians to choose between banking collapse and street riots, civil unrest, and passing the parcel onto future generations through sovereign debt slavery. The latter is clearly a moral crime and should be a legal one too. The former occurs because people are misled, by deposit insurance, that banks are safe. A private insurance firm that 'guaranteed' losses way beyond their balance sheet capacity would be closed down and the directors jailed - should be no different if bankers and politicians are involved. Basically the whole edifice of deposit insurance, fractional reserve banking, central banking, and the post-New Deal banking consensus has been exposed as the sham that it is. Time to go back to free banking or full reserve banking, or maybe some combination of the two (e.g. a regulated full-reserve banking sector, where people know the money is genuinely there. Then a totally uninsured free-banking sector where you pays your money and you takes your choice, caveat emptor and no tears if your bank blows up). Of course, no pin-striped pig with his snout at the trough is ever going to advocate something like this, why bite the hand that feeds?
The same government. Clearly, the only people responsible for a decision are those who agree to be responsible for it. In this case, that means the individuals in the government who contracted the deal. Not the next government, and definitely not the people as a whole. Whilst there is a pragmatic rationale for honouring debts incurred by prior administrations, there is no moral obligation or a legal one. States are sovereign, that's why they are called sovereign states. So caveat emptor - if you don't have gunboats and tank divisions, then you are shit out of luck if your sovereign debtor gives you the finger. If dumb investors choose to underprice the risk of being stiffed in a sovereign default - well, maybe they should do better analysis and research next time eh?
But you are confusing three different entities. It is not the Icelandic banks that will pay, even though they made the fuckup. It is not even the Icelandic government that will pay, although they dumbly agreed to back the deposits in part. It is Icelandic individuals who will pay, who agreed to neither of those things. Luckily, Iceland being a democratic country, the Icelandic people - and not a bunch of foreign gamblers - get to choose what their obligations are. Somehow, I doubt they will be sympathetic to your view. Neither the British nor the Dutch governments have the will to invade Iceland and turn them into a penal colony in order to get the money back, so most likely their citizens who gambled will just have to eat the loss, like every other dumb gambler normally has to.
Why should it have repercussions? You are assuming that the Icelandic people had the first clue about what that meant or what might happen. Retrospective punishment for accidental omissions is nonsensical. There must be ill intent or dereliction of duty for something to be wrongdoing. The consequences should be inflicted on those whose duty it was to know better. And that duty was not on the Icelandic taxpayers, it was on their finance ministry (a tiny handful of individuals), the EU bureaucrats who wrote the reckless, immoral, fraudulent deposit insurance scheme onto the books, and slept while ludicrous amounts of risk built up, and the various banking institutions who participated in the madness. Thus, they are the ones who should be held responsible. Many EU officials, and bankers in the private sector, need to be jailed for life without parole before even a single Euro can be morally extracted from the Icelandic taxpayer.
Yes and that sucks. Unfortunately, being a truly moronic destroyer of public funds is not a criminal offence in the UK, so the people responsible will get away with their negligence. Still, that doesn't mean it's the Icelandic people's fault that a few stupid Brit council members can't do basic due diligence or use a calculator.
G of C, sorry for the poor word choice...you are right...the terms speculative and investment can be understood as mutually exclusive.
And so if the Icelandic people won't pay it'll be the British people that pay, right, given that the Govt and the people are the same when it comes down to counting out the money. My point is that Iceland will pay a price, and a not insignificant one too, should it renege on what it agreed to. The tone of many of the comments in this thread has been that there will be no repurcussions worth worrying about. I think that's a naive point of view. I do find it very interesting too that Iceland's President justifies his actions on the basis that the people's voice must be heard. When has the people ever voiced its opinions on issues of sovereign debt other than at a general election? Would the icelandic president be rushing so eagerly to hear the people's voice if the tone of that voice weren't quite so convenient. I doubt it. These claims of "democracy in action" are just a thin veneer for what is a stance being taken in a political game with Europe.