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COMMENTARY
March 13, 2010
Icesave
Today's column, on the lighter side of bottomless debt, or the levity in leveraging, will be flippant. I ask my reader to bear this in mind. I may offer policy prescriptions to sovereign states that cannot be taken seriously. However he (or she!) should also realize that the policies of those sovereign states are light and flippant and should not be taken seriously.Truth to tell, I started drafting this column more than a week ago and, in that short time, owing to my tardiness in completing it, the sovereign states of Iceland and Greece have been catching up with my ludicrous fantasies, so I must hustle to get back out in front. The Icelanders take the prize, for what I shall call the "default option." Their problem -- or more precisely, the part of their problem currently in the news -- is more than $5 billion owed to British and Dutch governments (themselves teetering on the edge of bankruptcy), which compensated their own nationals for cash lost to an Icelandic online deposit scheme. Now note two things. These were the "victims" in only two European countries. And, the "Icesave" farce is only one component in little Iceland's financial meltdown, which resembles the runoff when one of her glorious volcanoes discharges from under one of her magnificent glaciers. Perhaps we should remember a third thing, that there were only 320,000 people in Iceland at last estimate, and so the per capita charge on "doing the right thing" would be very, very high. Iceland is a democracy, of course, so while the government was negotiating in dubious faith with frustrated creditors, "the people" had a referendum on whether they should pay. The results were, 93 per cent "no," two per cent "yes," and five per cent spoiled (mostly blank) ballots. And we get to that two per cent only by rounding. Iceland is also a very "liberal" country, or "social democratic" in the European political patois. (What that has to do with running up unpayable debts, only my more jaded conservative readers will guess.) This was a point brought home to me as I watched a short BBC segment consisting of interview excerpts with cool, sophisticated, expensively-dressed, fluently English-speaking Reykjavik voters, in what looked like art galleries. I was impressed not only with the unhesitant smoothness of each "No," but with the elegantly sneering and superior attitude towards creditors generally. They had such "class," as the progressive types like to call it -- those members of what Thomas Sowell has called the "anointed" or "self-congratulatory class." Such aristocratic bearing! And now that they have found themselves in a bit of a corner, the attitude is, "These are mere tradesmen and why should we pay their bills?" These are people who, thanks chiefly to the temporary success of a few grand financial scams, have risen a great height above their forebears, who were fishermen, and fishermen's daughters. They're all drinking "fair trade" coffee now. Indeed, why should anyone pay off debts? It's an old-fashioned concept, and from what I can see, the only reason Icelanders are discussing the question at all, is that the other Europeans are withholding aid and the succour of further loans until the "Icesave" issue is dealt with. But consider: there's another one born every minute. The Greeks have extricated themselves from their short-term fiscal emergency, even before their government has delivered on promised austerity measures, simply by floating new bonds to private investors at an exceptionally agreeable interest rate -- and even while their civil servants demonstrate violently against the whole idea of fiddling with their extravagant bonuses and early retirement plans. I gather the new issue was over-subscribed. And that would be an argument against letting Iceland default. The very idiots who lent them money in the first place might well turn around and lend them more. Still, that is the lenders' problem. Stupidity on that scale has to be punished. Surely the answer to all our problems of public debt is to default. I think it might even be the just answer, for generations whose parents were fiscally incontinent. In Canada here, where we are endlessly trying to fasten our fiscal belts, we are, after all, still effectively paying the compound interest on Pierre Trudeau's adventures in "social democracy" -- for which my generation voted, and from which we collected. Why should our children pay? The best argument I can think of is that if they don't, our various national paper currencies might quickly become worthless. And think of all the inconvenience that might follow from that. But then, can my reader suggest a quicker way to get back to the gold standard? David Warren
© Ottawa Citizen
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