Iceland’s Lost Billionaires Unmourned as Riches Draw Ire

[xchrom]

http://www.bloomberg.com/news/2013-03-19/iceland-s-lost-billionaires-unmourned-as-riches-draw-ire.html

Iceland, a country with a $13 billion economy, had six dollar billionaires before the financial crisis struck in 2008. Now it has none.

Five of the men -- including former West Ham soccer team owner Bjorgolfur Gudmundsson and Baugur Group hf founder Jon Asgeir Johannesson -- have lost all, or most of, their fortunes after building empires on loans from banks that used the island’s investment bubble to stretch their assets to 10 times the size of gross domestic product.

At least three of Iceland’s ex-billionaires are, or have been, the subject of financial misconduct probes. Johannesson, who once flew around in a pin-striped private jet and owned luxury apartments in New York and London, received a suspended one-year jail sentence in February for violations including accounting fraud. He and Gudmundsson, who filed for bankruptcy in 2009, personified the boom-to-bust cycle that dragged Iceland away from fishing and tourism and turned it into a center for high finance.

“Greed can’t again lead the way,” said Prime Minister Johanna Sigurdardottir, 70, whose Social Democrat-led government took over from the coalition that led Iceland into the crisis just over four years ago. “We’ve taken that route before with terrible consequences for this nation and its people.”

[fasttense]

1. Behind every great fortune is a great crime.n/t

[Earth_First]

3. Truer words have never been spoken... n/t

[Crepuscular]

18. every?

Behind every great fortune?

What's the great crime behind Al Gore's fortune?

How about Paul McCartney's or Oprah Winfrey's?

Or is merely possessing a fortune the crime, in and of itself?

[Gravitycollapse]

21. All Gore owns part of Apple. Which uses sweat shops.

[fasttense]

22. Yes, every

Our society is set up so that the rich can prey on the poor, uneducated, the sick, the hungry and fearful. It's set up so the rich are protected by laws while the worker and poor are prey. Some people do not themselves commit the crime. They merely use the economic system for themselves. The crime is that capitalism is set up to allow a few to make millions and billions at the cost of millions of other people's suffering. The great crime is that capitalism only allows for one great. Because that one great will take up all the resource instead of spreading it around to help everyone.

The crime may not be intentional but the crime is there tearing apart people's lives causing suffering of millions while a few get rewarded.

Paul McCartney's and Oprah's wealth is not due to some great and magical effort on their part. It's due to the fact that capitalism allows them to make huge amounts of money off other people's work. Oprah did not do it all herself, McCartney was NOT alone when he succeeded. Yes, Oprah had a tough life as a child and lucked into something that others did not. McCartney developed talent and married rich. But do they really deserve the huge wealth when millions go to bed hungry? If NOT for the copyright laws, if not for a legal system, police system and military (paid mostly by worker's taxes) that enforces copyright and other laws to the point that they hound people to suicide, they would not be as rich as they are. Yes, they would probably still be well off, but they would NOT own the huge wealth they currently own.

Did they commit the crime themselves? Probably not, but capitalism allowed them to accumulate way more than anyone deserves, while allowing others to suffer way more than anyone deserves.

[Oakenshield]

2. We could learn a great deal from Iceland.

[nxylas]

4. Yes, I await jail sentences for the bankers that caused the financial crash in 2008

But I won't hold my breath.

[Nye Bevan]

7. Don't. Because greed, hubris and incompetence are not crimes (nt)

[Blue_Tires]

15. Fraud and theft are crimes...

[Nye Bevan]

16. Which is why Bernie Madoff is in prison (nt)

[Puglover]

9. LOL like he severe ones referenced above?

"One year suspended sentence" For the record I won't hold my breath either.

[Javaman]

6. We "could"...

but we won't.

[Ruby the Liberal]

19. What, you mean a reset button and jail for the ones who caused the problem?

Surely you jest.

[Ian_rd]

5. So not all democracies are incapable of delivering justice to the wealthy

[AgingAmerican]

8. Iceland's failed Libertarian experiment

Milton Friedman convinced key people in Iceland's government to follow a libertarian model. The economy boomed for a couple years in a frenzy of greed based banking fraud, much like happened here, then everything collapsed.

The difference is, they jailed the bankers AND the politicians that enabled them. Their economy came charging back.

[HughBeaumont]

10. While we continue the same Friedman libertarian crapcake . . ..

. . . and await yet ANOTHER crash, likely greater than the one preceding it (if trends have anything to say) . . . which we'll learn approximately nothing from.

Oh, and all the banksters get is "away with it".

[fasttense]

23. You said it, err...wrote it, well Hugh n/t

[marmar]

11. k/r

[Purplehazed]

12. “Greed can’t again lead the way,”

Imagine that placarded on billboards, buses and lamp posts accross the country.

[redqueen]

13. K&R

[Egalitarian Thug]

14. K&R Theres' a lesson to be learned here. Why are we so resistant to learning it?

The voices favoring following Iceland's example are all but absent in DC and shouted down elsewhere. When people have shown themselves to be right time after time, it might be a good idea to listen to what they say.

[pampango]

17. Krugman: the Cyprus story has obvious parallels with both Iceland and Ireland

...the Cyprus story has obvious parallels with both Iceland and Ireland, with RMML — Russian mobster money laundering — as an extra ingredient. All three island nations had a run of rapid growth as banking havens that left them with banking systems that were too big to save. Iceland, at peak, had banks with assets that were 980 percent of GDP, more than 10 times the US number; Ireland was at 440 percent. Cyprus, at around 800 percent, was closer to Iceland in this respect. For a good summary, read this.

Iceland got through the crisis with less damage than Ireland, for two reasons. First, it let the banks default on liabilities to overseas creditors, including deposits in offshore accounts. Second, it had the flexibility that comes from having your own currency.

The own-currency advantage helped the real adjustment of the economy; it also allowed some fairly undisruptive financial repression, because the depreciation of the krona (coupled with temporary capital controls) led to a brief burst of inflation that eroded the real value of deposits. Savers were hurt — but with banks having grown to 10 times GDP, that was going to happen one way or another.

Cyprus, unfortunately, seems to be making a hash of it. To be fair, the proposed levy on depositors is actually smaller than the real losses Icelandic depositors took (and they lost on their currency holdings too). But this is just the beginning! Even with the effective default on deposits, Cyprus will need a huge loan from the troika, and the condition for this loan will be harsh austerity. This looks like the beginning of endless, inconceivable pain.

And while it looks as if the terms of the deposit tax are being revised, overseas creditors are still getting a much better deal than in Iceland. I’m still trying to figure out the technical aspects here, but it seems clear that one big problem is that Cyprus, unlike Iceland, isn’t willing to put its banking excesses behind it; they’re still trying to hold on to the RMML business, which means less taxation of the RMs and more taxation of locals.

http://krugman.blogs.nytimes.com/2013/03/18/island-nightmares/

Krugman seems to be saying that the Iceland way of dealing with an out-of-control banking sector (10 times bigger than the whole economy) was currency depreciation and a resulting burst of inflation which hurt ordinary savers - probably more than the 10% hit that has been proposed in Cyprus - but the pain was contained after that and recovery ensued.

In Cyprus, the government seems to be trying to hang on to their big international savers, apparently largely Russian oligarchs and mobsters, rather than cutting them loose - like Iceland did - and containing the pain to ordinary savers which was caused by inflation not fees in Iceland.

[cbrer]

20. WHEW!

Luckily, American billionaires don't need to worry about such harshness!



(where's that goddam sarcasm smilie when you need it?)