The idea that taxpayers are sheep who graze peacefully between annual tax shearing by governments who like to finance their high-flying buddies seems to have limits—at least it does in Iceland. There, more than 56,000 voters have signed a petition asking the government not to pay back foreign depositors who lost money when Icelandic banks failed.
Iceland has only 320,000 residents, so those signing the petition represent about 25 per cent of the country’s voters. Now this is what I’d call political activism on steroids.
Banks on the island collapsed in the fall of 2008 at the height of the global financial crisis, and last week Iceland’s parliament approved a law to allow the money to be returned to foreign depositors. Iceland’s President Olafur Ragnar Grimsson, however, has refused to sign the bill into law.
Instead, Iceland will hold a referendum on repaying Dutch and British depositors in its failed banks, giving taxpayers a say in whether they would bail out the Dutch and British who had chased high returns offered by Iceland’s banks.
What’s the old investment adage: high return, high risk? Apparently, the British government believes its citizens and institutions should be privileged and receive extraordinarily high returns with no risk. Their financial services minister, Paul Myners, warned Iceland of dire consequences if Icelanders reject repayment. As reported by UPI, Myners said:
“The Icelandic people, if they were to reach that conclusion, would effectively be saying that Iceland does not want to be part of the international financial system, that Iceland doesn’t want to have access to multinational, national and bilateral funding and doesn’t want to be regarded as a safe counter-party with whom to do business.”
Of course the people of Iceland would be saying no such thing. And I hope this Brit’s bully-boy tactics are ignored.
British investors took their chances with what should have been open eyes. They were not defrauded. A couple of years ago, Kaupthing Bank made its UK debut with the launch of a 12-month fixed rate bond paying a market-leading 6.86 per cent and an easy access account paying 6.50 per cent. Any reasonable investor would have understood that such high returns had to be accompanied by high risk, yet they invested by the tens of thousands.
And this was just one example, other Icelandic banks also offered extraordinarily high returns that British investors couldn’t seem to resist. They gambled their money and lost. If the British government believes its citizens should be shielded from risk, then let it bail out its own people.
How unfair it is that the ordinary people of Iceland must now make good on these lost investments or face the rancour of the British bullies.
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© 2009 Russell G. Campbell
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