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COMMENTARY
March 14, 2012
Iceland's advances
Should we feel flattered that the Icelanders - 70 per cent of them according to some foolish poll - want to adopt our loonie as their currency, to replace their worthless krona?No. The proposal is apparently serious. That Iceland needs some semistable medium of exchange, given what has happened since the Icelandic banking meltdown of 2008, we must grant. Their choice is informally between the Canadian dollar, founded in our fiscal rectitude, such as it is; the Norwegian krona, with associated oil wealth; the still-prestigious Japanese yen; and the euro. "Apparently" isn't the same as actually, however, and the proposal to adopt our Canadian dollar came from the opposition Progressive party, not the governing Social Democrats. It was first suggested only as a mental exercise, to help people imagine a package of arrangements that might, in aggregate, provide an alternative to full Icelandic membership in the European Union. (The country already belongs to the "Schengen Area," with much free-trading access.) Another poll suggests that Icelanders, by a large margin, now grasp that they cannot join the EU the way Ireland did in 1973, in exchange for wads of free money. Those days are gone, and these days, a country's sovereignty is surrendered in exchange for a large euro-bureaucracy, with dictatorial powers to run the economy into the ground or, in the case of Iceland, sit on it so it can never recover, with the weight of many million euro-regulations. In particular, Iceland would have to surrender her fishing industry: which remains her only visible means of support. Iceland's prime minister, Jóhanna Sigurðardóttir, though formally pursuing full EU membership, has herself begun musing aloud about alternatives. She has at least partially seen through her own argument, that Iceland could have some say in the Council of Europe. The truth is that Iceland's voting influence as a member state, arriving in the supplicant position, would amount to less than zero. Our ambassador, Alan Bones, has been encouraging them, with remarks on Icelandic radio to the effect that Canada would be happy to consider such a "loonie" arrangement, so long as Iceland does not expect to be consulted on Canada's monetary policies. And as our own economy is more than 100 times larger than Iceland's, there'd be little harm they could do. I take it Bones was speaking with the authority of the Conservative government, and not as a consequence of months in the darkness of the near-Arctic winter, which can drive even sober people squiffy. There are (sad) Latin American precedents for countries adopting the once-mighty U.S. dollar as their currency, officially or semi-officially. For generations, expatriated U.S. currency in foreign accounts has been referred to as "Eurodollars." Sterling once had this place, throughout and beyond an Empire upon which the sun eventually set. For that matter, the old Athenian "owls" (silver drachmae) were once recognized, as the "greenbacks" of the ancient Mediterranean. So there is nothing novel in Iceland's notion of buying into Canada's relative stability, except the acknowledgment that we may be emerging as an economic "superpower" in the world order that follows from the decline of the United States. High-tech, resource-rich, and waking from the soft-socialist nightmare our American cousins are now drowsing into, we rise as they fall. But only comparatively, and we'd be unwise to crow about it. Much of that vast American economy must fall on us, and as I've written before, we'll have to scramble to replace failing U.S. customers. Much of what the Obama administration is doing, and will be doing at an accelerated pace if he wins re-election, will have repercussions here. For instance, Barack Obama's environmentalist czars will continue working on the destruction of the continent's fossil-fuel energy infrastructure, and its replacement with catastrophically inefficient wind farms, sun farms, and the like. As his Keystone and other decisions show, he intends to punish us for exploiting our own tar sand and shale oil reserves. Intense political pressure may be brought on us to copy various U.S. green schemes. In addition to maintaining our economic enterprise, we must find the political will to resist the dust bowl ideological winds that may come screaming across our border. On the question of currency, the challenge we face is shared with all other countries now contemplating the collapse of both the euro and the American dollar. Here, especially, we cannot afford to be smug about our comparative strength, for we look toward a pit in which we would be buried with them. To my mind, we should ourselves be seeking the ground upon which a new international trading currency can be founded - some new gold standard or equivalent that can provide both a store of wealth, and a trading benchmark, beyond the reach of politicians' inflationary impulses. Iceland, which wrecked itself trying to play clever leveraging games in our world of confidence-gimmick paper, is irrelevant to this challenge, and should be ignored. David Warren
© Ottawa Citizen
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