We are not Iceland (but maybe we should be)

What can I say? Seven weeks now, and the market is still up. I'm beginning to regret moving most of my investments to bonds.

But not just yet, because I remain convinced that we have not yet reached the bottom of our economic crisis. And why do I stick to that belief?

Because we're not Iceland.

Iceland went bankrupt a few months ago. Its conservative-led government let what the New York Times called "buccaneering free marketers" run amok through the country's economy, with the expected results.

Disaster.

But unlike here, Icelanders apparently think with the brains they have, and they knew that their conservative, anything-goes-in-the-free-market government was to blame.

So, naturally, they started protesting in the streets. And that led to the conservative government's resignation and a caretaker government's installation -- led by the Social Democrats, whose leader, Johanna Sigurdardottir, became caretaker prime minister.

This weekend, the Icelanders went to the polls, and they chose the Social Democrats and their liberal coalition partners the Left-Greens (does that mean Iceland has Right-Greens?) to stay where they are. And that includes Sigurdardottir, who is Iceland's first female leader.

And the world's first openly lesbian head of state.

I know the American right is terrified right now. But that's what happens when you fuck up your country as badly as the New Vikings, as the greedy sons of bitches in Iceland called themselves, did. The lesbians take over. The lesbians and a trucker dude from the Greens. His name is unpronounceable to us white folk in the United States too. Steingrimur Sigfusson. He's also a geologist. The prime minister used to be a flight attendant. Not a lawyer in sight. Or an MBA.

Sigfusson was Iceland's finance minister in the caretaker government, and he'll probably stay there. Despite being a geologist and former truck driver, he seems to know what he's talking about, finance-wise.

What are the people of the United States mad about now? It is the same poisonous philosophy that we had here, based on a lack of moral awareness and greed, and people who thought nothing of flying Elton John into Iceland for their 50th birthdays and paying him 70 million Icelandic kronur.

That's about $600,000, if you're keeping score. $600 grand, just for the entertainment at your 50th. I had Mexican food at one of my favorite restaurants for my 50th. The entertainment was the house band. If I had $600K to spend on entertainment for my birthday party, I'd fly all my friends to someplace really cool. Maybe Reykjavik. But we'd have to import the Mex.

Anyway, the conservative Independent Party -- independent of reason? -- managed 16 seats in the 63-seat Icelandic parliament -- called the Althingi, which they say is the oldest continuous legislative body in the world -- two more than the Left-Greens. But Sigurdardottir's party racked up 20 seats, giving their coalition 34, more than enough to form the government.

Interestingly, this is the first time in modern history Icelanders have elected a left-leaning government. But no wonder they did it this time. The conservative-New Viking alliance pretty much destroyed Iceland's economy. Unemployment -- virtually unheard of in the tiny country before -- is now at about 10 percent. Inflation is well into the double digits, and the financial experts are still trying to figure out what happened and how much it cost.

According to the Times,

Many of the debts that drove the banks to the brink of default were incurred as the New Vikings went on a splurge of acquisitions that made them owners of department store chains, soccer clubs and investment houses in Britain and other parts of Europe, as well as mansions, helicopters and Ferraris on their sojourns at home here in Iceland.

Sound familiar?

And as for the costs, the Times says that some estimates run to as much as $10 billion, which is about $30,000 for every man, woman and child in a country that has just over 300,000 people.

But unlike here, the Icelanders are following their leader -- a quiet, steady and pragmatic leader, who does not seek the spotlight, but instead puts her attention toward fixing the mess she was left with.

The people are calling for a change of ethics. That is why they have voted for us,

she said. Her chief opponent -- the leader of the Independence Party, Bjarni Benediktsson -- reacted much like his Republican counterparts in the United States. That is, he was clueless.

We lost this time but we will win again later,

he said.

Anyway, Sigurdardottir, who at 66 was getting ready to retire from politics, will have to stick around for a while longer to fix what conservatism wrought in her country.

But that's how I know we're not done here yet. Because in Iceland, when everything crashed, they didn't try to pretend we just needed a little stimulus here and there and some more tax cuts for the rich and everything would be fine. When everything crashed, it crashed, and everybody knew it. And they threw out the greedy bastards who did it.

But don't worry, some of the conservatives in Iceland are just as brain dead as ours are. If you read the comments on some of the Icelandic media Web sites, you'll find them claiming the Social Democrats, who were not in power until earlier this year, were responsible for the collapse of the economy last fall. My Scandinavian language skills are really poor, but I think I saw something about Sigurdardottir being born in Finland or something too. The socialist thing isn't working though, because, well, her party is the Social Democrats.

Oh, and by the way -- I love this -- 26 members of the Althingi elected this weekend were women. That's 46 percent. Compare that to our 16 percent. Now, I'm gonna go out on a limb here and say the Althingi probably isn't very ethnically diverse, but then, we are talking about Iceland, where 94 percent of the people are a mix of Norse and Celts and the rest come from somewhere else more recently.

Y'know, we could maybe learn a lot from a little island in the north Atlantic.



News Writer
AWOP Political Contributing Editor
Author of Stop the Press!

Cross-posted at News Writer's Guide to the Market

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The way we were

Steve Benen at Political Animal notes what we've all been noting -- that the conservative pod people who spent seven weeks decrying Obama for tanking the market have been oddly -- or not -- quiet for the past four weeks that it's taken the Dow to rise above 8,000 for the first time in ... oh, let's see, seven weeks.

Here's what the Wall Street Journal said just a short month ago (i.e., right before the Dow started this upward trend):

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.

...

So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.

What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.

Wall Street Journal = Rupert Murdoch = Big Business = Republican. Lately? The WSJ notes that government is the only sector actually hiring people and complains that the Obama administration isn't playing GW's asinine "global war on terrorism" fear game, so labeled because the Bush administration didn't want to openly go and call it a global war on Islam -- that's what they have talk radio and Fox "News" for. Oh, yeah, and since we can't play the terrorism fear game with this administration, we'll just play the fake socialism fear game.

Of course, the whole idea of blaming or crediting a president for the rise and fall of the stock market is just plain silly, because we all know those freaky children out to make a killing and retire to the Hamptons, or GW's toney Dallas neighborhood, make their decisions to buy and sell on which way the wind is blowing, and I don't necessarily mean the political wind.

Meanwhile, both Barry Ritholz and BAGNewsNotes take on one of my favorite subjects: What the fuck was the president thinking to hire people to get us out of the mess that they were responsible for getting us into (jeez, I'd strangle one of my writers for a sentence like that).

BNN does it with this fabulous cover of TIME magazine from February 19, 1999. That's Robert Rubin, Alan Greenspan and Larry Summers, "the three Marketeers." I think Tim Geithner was too young in 1999, but then, he's d'Artagnan anyway.

BNN makes two points that I've been making for weeks now -- that the financial sector has already failed and that if the financial institutions are too big to fail, they shouldn't have been in private hands to begin with, and, in fact, they weren't. The government has been gaming the system for them all along, with lots of campaign contributions to back it up.

A new report by Wallstreetwatch.org reveals that from 1998 to 2008, the finance industry made $1.7 billion in contributions to Washington politicians (55 percent to Repubs, 45 percent to Dems), spent $3.4 billion on lobbyists (3,000 of them on the industry payroll in 2007 alone) and won a dozen key deregulatory victories that led directly to today's financial meltdown.

Inherent in the industry's push for unbridled expansion was the unstated goal of guaranteeing that they would get taxpayer bailouts if things went badly. So many investors, businesses, employees and others would be hooked into these multitentacled blobs that government would be compelled to rescue the banks from their own excesses.

Knowing that they could privatize all of the profits from quick-buck schemes and socialize the losses, bankers were unleashed to do their damnedest. Which they did.

Meanwhile, Cardinal Richelieu (formerly played by Hank Paulson and Ben Bernanke, now only portrayed by Bernanke) has d'Artagnon's backing to create yet another regulatory entity, one which no doubt will work just as well as the one we actually have that didn't do its job, largely because it's the banking industry that regulates the watchdog. Talk about your fox and henhouse.

Ritholz targets Athos -- Larry Summers -- for his crimes, noting that he's made quite a bit of money from one particular hedge fund and speaking engagements at various financial institutions. Where might his loyalties lie? Certainly not with the American public. Ritholz:

If the history books eventually judge the Obama administration a failure, they may have to point to one horrific appointment as the root cause of the misguided policies: The 'Smart Guy' who decided to continue the 'Dumb Guy’s' policies.

Sara Robinson, writing at the Campaign for America's Future with Terence Heath in the "Time to Deliver" series, writes that it's crucial to push this administration to make some actual change, else that change will be made for us something else I've been saying).

In short: The Bush administration left behind a political, economic, and social pressure cooker that was building up a dangerous head of steam toward violent, revolutionary change. Obama's lifted the bobbler and let a bit of that pressure escape; but the seal is still tight, and the heat under the pot is rising faster than ever. If he doesn't find a way to resolve these issues and/or channel the outrage soon, Davies' model suggests that our last best chance for peaceful evolution will soon enough be behind us, leaving us to work this transformation out on by far more barbaric means.

...

The important fact about this new era we find ourselves in is this: We can't ever go back to how it was. The world we've known since World War II is gone, and it's not ever coming back. Americans are in varying stages of accepting this reality -- but the sooner they do, the better off we'll be. There are vast structural changes (which, in themselves, are fodder for another post) that are profoundly re-shaping our entire reality, and which are not going away no matter how insistently our elites try to obfuscate or deny them. One way or another, now or later, we are going to be forced to address those shifts, and devise a new economy, new technologies, and new social priorities that will enable us to adapt to them.

The only real choice we have right now is whether we're going do this change the easy way -- thoughtfully, exercising our collective foresight to make clear-headed decisions that will ease us through a peaceful and relatively smooth transition; or whether we'll choose to go down hard by continuing to postpone dealing with it, building up the pressure until there's an inevitable explosion that utterly flattens us economically, environmentally, politically, and socially. That's the deal now. Face up to it while it's relatively cheap and easy; or face up to it later, when our options and resources will both be much fewer.

This is what the conservatives don't get: We can never go back to the way it was. I'm not sure if Obama gets that, and I'm sure the Marketeers and their friends don't, and guess who has the president's ear on these matters?

When he should be listening to Stiglitz, Ritholz, Krugman and Johnson, Obama is listening to Bernanke, Summers and Geithner -- Paulson and Greenspan being at least physically out of the picture.

That needs to change. And soon.

News Writer
AWOP Political Contributing Editor
Author of Stop the Press!

Cross-posted at Stop the Press!

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Peace Y'all