Central Perk: 20 feb. 2011

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Mish's Global Economic Trend Analysis

Iceland Once Again Tells IMF, UK, Netherlands "Go to Hell"; "Ice Torture" Repayment Scheme Collapses

Posted: 20 Feb 2011 08:47 PM PST

Hats off to Iceland for a second time for telling the IMF, the UK, and Netherlands to "Go to Hell" over the most recent Icesave proposal, better thought of as Ice Torture.

Please consider Iceland's President Vetoes Icesave Deal

For the second time, Iceland's president vetoed a bid by the island nation's Parliament to repay the U.K. and the Netherlands more than $5 billion lost by depositors in Iceland's epic 2008 banking collapse—sending the matter to a referendum by a deeply skeptical public and complicating the country's application to join the European Union.

The dispute over Icesave—the online arm of a failed Iceland bank that took deposits from British and Dutch savers—has percolated for more than two years, reflecting the Icelandic people's dissatisfaction with paying the price for what is almost universally regarded as the hubris of a few bankers.

A first attempt at a repayment deal in 2009 faced stiff opposition in the Icelandic parliament. A modified bill passed later that year, but President Ólafur Ragnar Grímsson vetoed it in early 2010, triggering a referendum, which failed.

The new deal carries substantially better terms—Iceland has until 2046 to repay, at an interest rate of about 3%—but Mr. Grímsson said in a statement issued Sunday that the Icesave issue is so weighty and so contested that it wasn't up to Parliament to decide.

"There is support for the view that the people should once again, as before, act together with the Althingi as the legislator in this matter," Mr. Grímsson said, using the local name for Iceland's thousand-year-old Parliament.

The presidential veto is rare. It has now been used just three times since Iceland's independence from Denmark in 1944. The Icelandic president approves nearly all bills passed by Parliament; under the constitution, he may only approve or call a referendum.

If history is a guide, the deal once again faces nearly certain defeat. In the first plebiscite, 93.2% of voters, or 134,392, rejected the bill. Just 2,599 picked "yes," badly trailing even the 6,744 who left their ballots blank.
The British and the Dutch governments stepped in in 2008 to compensate depositors in their countries who had placed money with Icesave, since Iceland's tiny deposit-insurance program was woefully short of cash. The two nations soon demanded their money back—about £2.35 billion ($3.8 billion) for the U.K. and €1.32 billion ($1.8 billion) for the Netherlands.

The total amounts to about half a year's economic output.

Iceland repayment talks collapse

The BBC Reports Iceland repayment talks collapse

Talks on how Iceland will repay more than 3.8bn euros (£3.3bn) of debt it owes to the UK and the Netherlands have broken down without agreement.

The collapse of the Iceland-based Icesave online bank in October 2008 hit savers in both countries.

The UK and Dutch governments are seeking repayments from Iceland after they compensated savers themselves.

However, the three governments have been unable to agree on revised payment terms after a week of negotiations.

"We had hoped to be able to reach a consensual resolution of this issue on improved terms, but this has not yet been possible," said Iceland's finance minister Steingrimur Sigfusson.

In a statement, the UK and Dutch governments said they were "very disappointed that despite all the efforts over the past year and a half, Iceland is still unable to accept our best offer on the Icesave loan".

Iceland plans to hold a referendum on the Icesave repayment on 6 March, but the government is hopeful it can reach a different deal ahead of that.

Opinion polls suggest that a majority of Icelandic voters would reject the repayment plan.

The dispute has delayed International Monetary Fund help for Iceland, which Reykjavik needs to shore up its stricken economy.

The country's parliament voted for a referendum on the Icesave bill after President Olaf Ragnar Grimsson vetoed the repayment to the UK and the Netherlands.

Opponents say the repayment plan forces Icelandic taxpayers to pay for bankers' mistakes.

The dispute has also overshadowed Iceland's application to join the EU, which was submitted in July.

Iceland's economic crisis persuaded many of its politicians that it would be better off inside the 27-nation bloc.

Arrogance of UK, Netherlands

Note the arrogance of the UK and Netherlands issuing a statement "Iceland is still unable to accept our best offer on the Icesave loan". It is up to Iceland to make its best offer not for the UK and Ducth governments to make demands of 100% repayment.

Why should Iceland crucify its taxpayers with a "loan" when the correct procedure is a massive haircut.

Ireland should immediately counter with its "best offer" of one cent on the dollar. That will set the tone for reasonable expectations.

Somehow the Icelandic Parliament does not get it. Fortunately the president does.

Commending Iceland's President

I commend the decision of the president to send this to the people to vote. Moreover I encourage Icelandic voters to vote the same way they did last time.

Here's the deal. When you make stupid investments, don't expect to be bailed out. There is no reason the people of Iceland should have to pay for the stupidity of others.

If the UK and Dutch governments were dumb enough to guarantee those deposits, then the UK and Dutch governments should pay the price, not Irish citizens.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Walker Wants to Save 12,000 Jobs; Unions Don't Want Them; Obama Group "Organizing for America" Bussed in Protesters; Walker too Generous to Unions

Posted: 20 Feb 2011 09:31 AM PST

Unions don't really want to save jobs. Rather they want every union worker to extort every possible cent from every possible taxpayer. The goal of unions is to do the least work at the most cost.

Governor Walker's proposal will save 12,000 jobs. The union does not care. It would rather fire 12,000 teachers than for all of them to make modest concessions.

I have countless examples to prove that, yet the myth goes on.

If this was really "about the kids" rather than about the greed and arrogance of the public unions, teachers would be in the classroom teaching instead of fraudulently calling in sick, with help of doctors aiding and abetting that fraud.

Please consider 12K State Workers Could Be Fired Without Budget Deal, Wisconsin Governor Warns

If changes aren't made to the benefit contributions paid by Wisconsin's nearly 300,000 public sector employees, about 10,000-12,000 workers will lose their jobs, Wisconsin Gov. Scott Walker warned Sunday.

"I don't want a single person laid off in the public nor in the private sector and that's why this is a much better alternative than losing jobs," Walker told "Fox News Sunday."

"If we're going to be in this together, (cut) our $3.6 billion budget deficit, it's going to take a whole lot more than just employee contributions when it comes to pensions and health care," Walker said. "But it's got to be a piece of the puzzle because as I saw at the local level, it's like a virus that eats up more and more of the budget if you don't get it under control."

President Obama, whose group Organizing for America, has bused in some of the nearly 70,000 protesters outside the state capitol on Saturday, last week called the bill "an assault on unions."

Under the governor's proposal, unions still could represent workers, but they could not force employees to pay dues and would have to hold annual votes to stay organized. Only wages below the Consumer Price Index would be subject to collective bargaining, anything higher would have to be approved by referendum.

Walker Too Generous

That last paragraph shows that Walker is too generous. Wages should not be subject to collective bargaining at all. Who knows what the CPI will be in a few years? The proposal could in theory balance out given the amounts the workers have to contribute to benefits is not subject to collective bargaining. However, in all likelihood, we would see the same sort of public union reaction during every collective bargaining session.

The ideal approach is to end collective bargaining altogether. Public union workers who do not like their offers would have the same choice as everyone else: accept the job or leave.

Those who think they can make more in the private sector are free to do so. Yes, it really is as simple as that.

Even FDR Understood the Problem

Public unions get into bed with management and politicians and work out sweet deals for themselves at taxpayer expense. No one looks out for the taxpayer. Even FDR understood the problem.

Message From FDR

Inquiring minds are reading snips from a Letter from FDR Regarding Collective Bargaining of Public Unions written August 16, 1937.

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.

The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees.

A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Seth's Blog : Bankruptcy

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Bankruptcy

"Declaring Chapter 11"

What a poetic phrase, starting with 'declaring'. Not sighing or announcing or admitting, but Declaring!

Chapter 11 refers to part of the bankruptcy code that covers reorganizations. In Chapter 11, you don't shut down your business. Instead, faced with failure, you suspend certain agreements and debts and negotiate in a way that permits you to continue.

Chapter 7 is very different. It means "I give up." You shut down, it's over.

Metaphorically, we have the chance to declare either kind of bankruptcy whenever we work on a project or consider a habit, a social media addiction or even a job.Teetering on the edge of bankruptcy is painful. Declaring is often a relief.

Acknowledging that you're stuck is the very first step in getting unstuck...

Perhaps it's time to stop fighting a losing fight and start creating value doing something else instead. Bankruptcy is never fun, but when you give up something that wasn't getting you where you needed to go, sometimes you discover a future better than you ever expected.