February 24, 2010
The International Monetary Fund operates primarily as a banker bailout machine. They cajole and tempt and confuse and threaten the leaders of governments worldwide to pay off the failed bets of the big bankers using the taxpayer funds of their countries. This has been going on a long time, at least since the early 1980s.
Thus, I am not in the teeniest bit surprised that the same thing is happening today in Iceland and Latvia.
- A d v e r t i s e m e n t
This article by Michael Hudson has some of the details:
For the past decade Iceland has been a kind of controlled experiment, an extreme test case of neoliberal free-market ideology. … Is there a limit, a point at which government will draw a line against taking on public responsibility for private debts beyond any reasonable capacity to pay without drastically slashing public spending on education, health care and other basic services? …
The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts — Iceland’s bankrupt Kaupthing and Landsbanki with its Icesave accounts, and heavily debt-leveraged property owners and privatizers in the Baltics and Central Europe — but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders.
This is the trick: replacing private debts with public obligations. Lots of people loaned money to banks and corporations in Iceland. They are now facing huge losses.