- Icelandic con men took over the 3 major banks of that country and worked in collusion with government and its fractional reserve lending scam to get rich quick. They had nothing in the game (the credit they lent out for interest was created from thin air) and so they leveraged up with basically no oversight from a complicit government. The whole thing stinks of organized crime to this day. Very few prosecutions have occurred as a result.
- The scam worked for awhile and the con men got very rich as a result but when the global debt Ponzi began to collapse the ridiculously leveraged Icelandic banks were wiped out early in the process.
- In order to lend out that much money, the banks had to have some form of cash reserves to serve as an "anchor" for all that leveraged gambling. Those reserves came in the form of deposits from Icelanders and from foreigners. Bank deposits are not savings contrary to what many people believe but rather loans made to the banks which banks pay interest on (which in many cases includes "free" services like free checking, no ATM fees, etc.). In reality, nothing is free. They are investing (gambling with) deposits in order to pay interest on accounts, pay salaries and pay for buildings and infrastructure. Gambling always carries with it the risk of loss.
- Icelanders put their money into their banks because that's what people have been taught to do. But foreigners put their money into Icelandic banks because the banks were offering higher interest rates than banks in their own countries. No doubt there was a lot of money laundering and tax evasion going on there too. In other words, foreigners wanted higher returns and more anonymity than they could get at home but they completely discounted the risks.
- When the Icelandic banks collapsed, the Icelandic government created money from thin air to pay off its own citizens. The Icelandic citizens still got screwed in the deal because by the time they got paid the purchasing power of the money had plummeted by more than half. The Icelandic government paid off its own citizens in order to avoid being hanged in the streets. But foreigners? They do not even live in the country so the government deemed it an acceptable risk to stiff them.
- In order to avoid public unrest in their countries, foreign governments made their citizens whole regarding their Icelandic losses and then went after Iceland at the sovereign level to repay.
So what now? Are the creditors going to invade Iceland to get their money back? No, I think not. Their only play at getting paid is to starve them of credit and hope that everyone there is too dependent on it to do without it. In other words, stop giving the credit addicts their drug fix until they agree to lifetime debt slavery. I don't think this is going to work on Icelanders. I think they live in an oftentimes inhospitable country and they are used to adversity of many kinds. It has made them strong. Also, they have a big ocean with which to catch their own food so they can't be starved into submission either. I think that if they had to they would quickly get used to living without foreign credit and they would eventually have a stronger economy as a result.
This is absolutely not what the global credit con men want to happen. The very thought of it terrifies them. What if other people were to observe Iceland getting ahead and living better lives by shunning credit? For this reason I think they cannot and will not allow it to happen. If people start believing that they can live without credit then the con men will have to get real jobs and they will no longer be able to make a fat living off the global credit scam. Mark my words: Iceland will not repay and they will only get a tiny slap on the hand from the credit mongers. Within a year or two the credit will be available again for the very reason that the credit mongers cannot have their addicts kicking the habit - it's just bad for the business.
Iceland may very well end up serving as the model for all other underwater EuroPIIGS. If Iceland doesn't have to repay then why should anyone else? The leaders of the EU should just quietly give Iceland the cash to repay the debt so that it will appear as if Iceland caved and paid up. Their actual debt is small compared to others like Spain. It would set a good precedent for the other PIIGS to follow. But regardless of these kinds of tricks, all of the PIIGS will eventually default because they don't have the money to pay. What cannot be paid will not be paid. All of the bailouts are just throwing good money after bad so that the statists and con men can remain in charge for a bit longer.
