I got responses to my previous posting, blaming the Icelandic people for the current crisis. As it seems to be common theme, I feel that it warrants a new post.
I agree that it's only natural that you should feel frustrated when someone who owes you money does not give it back. But these ‘Icelandic pirates’, as some call them, did nothing that our own banks, and most other banks around the world did not do.
The Icelandic banks have never pretended to be safer than they really were. It’s not the role of the bank to tell us how safe it is. Banks are regulated by international standards, audited by international auditors, and rated by external rating agencies. All the above practices should be questioned. But as for the Icelandic banks, they followed these practices just like HBOS, Northern Rock or RBS; otherwise they would not have been allowed to operate in the UK.
This is commercial reality; when you lend money, there is always a chance that you will not get it back. The higher the risk, the higher the return, and if you want risk free investment, you get a low risk free rate.
Why do you think the Icelandic banks were so attractive? Because they offered higher rate. Why did they offer higher rate? Because, at the time, they were considered more risky than our own banks. They did not lie; they worked within the international and UK laws imposed on them. They did not even run into bigger troubles than our own banks; only that their government does not have the size of population it can tax to bail them out.
If it’s done illegally, there should be a court case and some may go to jail. If, on the other hand, it is done by the accepted commercial standards (as this is most likely the case now), then you become a creditor and stand in the queue together with all other creditors.
This, of course, is different when money is given by shark loans. Then if you can’t pay back you should expect to end with broken knees and new holes in your body. But is this the reason we created anti-terror laws, so that we can do whatever we want with anyone we do not like or have a dispute with? I surely hope not. I would not like to live in such a country. I don’t think most of us would.
As for the Icelandic people, the situation is devastating to them as much as the financial failure is devastating to the average person here. The crisis was caused by all of us, the governments and institutions of the developed world. The crisis will be felt by all of us, the tax payers of all these countries.
It’s only natural that in times of hardship racism and separatism raise their heads. I surely hope that this time will be different. Sadly, it does not seem so.
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