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Transcript: Thom Hartmann, Lilja Mósesdóttir & Brynja Halldórsdóttir: Iceland politics, economics. January 9, 2012
Thom Hartmann: Thom Hartmann here with you broadcasting live from Reykjavik, Iceland and Jacob is everything working on that end? Everything’s working. It’s amazing. It’s incredible. And we’ll be taking your calls later. But right now I’m joined in the studio by a couple of refugees from the Icelandic Parliament. And the first is Lilja?
Lilja Mósesdóttir: Lilja Mósesdóttir.
Thom Hartmann: Thank you. Lilja Mósesdóttir. And then also, maybe I can widen this shot and get both of you in there, no I think that’s as wide as it goes. And also with us is, can you say your name please?
Brynja Halldórsdóttir: Brynja Halldórsdóttir.
Thom Hartmann: Brynja Halldórsdóttir.
Brynja Halldórsdóttir: Almost like Brenna, but with a J.
Thom Hartmann: Okay, but with a J. and we have about maybe four or five minutes here and then there will be a commercial break and then if we can stick around we can talk after that? Is that okay? So if I could start with Lilja?
Lilja Mósesdóttir: Lilja.
Thom Hartmann: If I could start with you, Lilja. Lilja, you’re an economist?
Lilja Mósesdóttir: Yes I used to be a professor in economics before the crisis. But now I’m an MP.
Thom Hartmann: Okay. As in Member of Parliament.
Lilja Mósesdóttir: Yes.
Thom Hartmann: Okay. And what, first of all, I understand you’re starting a new political party after leaving the leftist greens. Do I have that right?
Lilja Mósesdóttir: Yes. I entered politics because I wanted to change Iceland, you know? Use this economic crisis as a window of opportunity and move us closer to the Nordic countries. Iceland is characterized by more liberal policies and liberal welfare state. But it was difficult during the two years after the crisis to reform the left green party from within.
Thom Hartmann: Why is that?
Lilja Mósesdóttir: One reason was that I entered something that was already established and there were certain power relations. The elites within the party were not willing to give space to people coming from outside. I was coming from the university and I had not been participating in politics.
Thom Hartmann: Yeah. We hear this in American politics too. Party politics.
Lilja Mósesdóttir: Yeah. And they didn’t want, they didn’t even want to use my knowledge as an economist and I think my knowledge was a bit of a threat. But the main reason why I left the party is because the party took too many u-turns. It was against the IMF program for Iceland, it was against it. But then it decided to honor the IMF agreement. Okay, I could live with that. But my party leadership decided to extend the agreement with the IMF for nine months. You know, and not change it at all.
Thom Hartmann: For our American listeners who don’t know what we’re talking about the IMF agreement basically, first of all, the banks here in Iceland went on an, just a wild spree and ran up a debt that’s equal to a more than tenfold multiplier of GDP, right?
Lilja Mósesdóttir: Ten, yeah, they were more than ten times the GDP.
Thom Hartmann: And then it crashed. And then the banks said we would like you Icelanders to please give us this money. And the IMF came in and said we’re with the banks. Am I characterizing that clumsily but accurately?
Lilja Mósesdóttir: In very short, yeah. That’s the story.
Thom Hartmann: And so the internal debate was do we pay back the banks and go along with the IMF deal or do we say to them take a hike or we’re not going to do it under these terms. Because they attached all these terms, these inflation adjusters and things that.
Lilja Mósesdóttir: The question was do we need the IMF. I mean, Iceland is a very rich country, yes we did need the IMF June October 2008 because of liquidity crisis. I mean Iceland only had money to pay for two weeks of imports when IMF came into Iceland. But we had actually been hoping that the Nordic countries would come in, step in, and help us with the liquidity problem.
Thom Hartmann: Right. But they chose not to.
Lilja Mósesdóttir: NO, they chose not to.
Thom Hartmann: And thus you had to turn to the IMF.
Lilja Mósesdóttir: Which still amazes me. And I think it was pressure from the EU or from the international community that, countries that go into financial crisis they go to IMF.
Thom Hartmann: Right. Now the Nordic countries, Denmark, Sweden, Norway, Finland, what am I missing? Is that it? They all have their independent currencies, right? Sweden still has the Krona, or are all using the EU or the euro?
Lilja Mósesdóttir: Finland is using the Euro. The Danish Krone is connected to the Euro. The Swedes use the Swedish Krona and the Norwegians, the Norwegian Krone. And we have our Iceland Krona which is not worth very much. And its value fell by 80% during 2008.
Thom Hartmann: Oh my goodness.
Lilja Mósesdóttir: Yes.
Thom Hartmann: That’s incredible. So what, what’s the first lesson that you got as an economist that got you into politics out of watching these banks basically take down your country?
Lilja Mósesdóttir: We need regulation. I mean the reason why we got so big, it was because we used the agreement with the European Union on the European Economic Area. Iceland is a part of the European Union as concerns the free flow of capital goods and labor and services. And we have to change all our legal framework to adapt to this you know, free market flow. And the government of the Independence Party, a kind of liberal party, used the opportunity to kind of deregulate the whole economy. So we went further than most other countries in deregulation. We need regulation. And also, they also privatized our banks.
Thom Hartmann: Aha. And in fact your banks were government owned and before joining, or before agreeing to all of this, before this “liberalization” in America, liberal means a good health insurance policy and social welfare programs. In Europe, of course, liberal means what in the United States we call conservative.
Lilja Mósesdóttir: Yeah.
Thom Hartmann: So it’s all very confusing to Americans. But the, before that liberalization took place and the banks were deregulated and all this craziness, things were stable here? Iceland was running fine?
Lilja Mósesdóttir: No, Iceland has never been very stable. Because we live, or we get our export incomes.
Thom Hartmann: Excuse me, Jacob are we going to break? Okay. I’m sorry. We’ll be right back. This is Thom Hartmann, we’ll be right back from Iceland.
Thom Hartmann: Welcome back, Thom Hartmann here with you, broadcasting live from Reykjavik, Iceland. And with me in the studio is Lilja Mósesdóttir and also Brynja Halldórsdóttir. Do I have that?
Brynja Halldórsdóttir: Yeah, almost correctly.
Thom Hartmann: Almost correctly. So Brynja, let me ask you if I may. What’s your take on how Iceland got into the economic crisis that it’s in and how the people responded, how the government responded, and basically what’s going on and why you are upset with the political process.
Brynja Halldórsdóttir: In less than five minutes.
Thom Hartmann: Yes, absolutely. As a former, as a participant in all this.
Brynja Halldórsdóttir: Well what happened is, well there are many things. But mostly we had deregulated banks who went crazy, went on a spending spree. And when they were bankrupt we decided to bail them out instead of treating them like any other company, just let them go bankrupt or guarantee a part of the assets, not everything like we did. So what is happening now is that we have had a crisis for a few years. But I don’t really see, I don’t see what other countries see when everyone is saying oh everything is horrible in Iceland. It’s not, it’s really not.
Thom Hartmann: Yeah. It seems like life is quite normal.
Brynja Halldórsdóttir: Yeah.
Thom Hartmann: Although I understand that housing debt, household debt was in some ways part of the equity that the banks held and many people, there was a big housing bubble here just as there was all over the world as these banks were offering cheap money and so people were turning over houses. And so a lot of people, in the United States we’ve got, I think it’s a third or maybe half of all mortgages are what’s referred to as under water. 100 thousand dollar mortgage on a house that’s worth 60 thousand or 300, you know whatever it may be. But it’s typically about a 20 or 30%, that people owe more than what their house is worth. I understand here it could be a hundred or hundreds of percent more because of the way the banks have played this game?
Brynja Halldórsdóttir: Yes, that’s correct.
Thom Hartmann: So what, if your house, if you owe 300% more than your house is worth, what do you do?
Brynja Halldórsdóttir: You talk to your bank. You talk to the bank and you get a deal. We have what are called the 110% way, that the banks are offering people to pay less if the debt in their house is more than 110% of what it is worth. And we have all kinds of ways for people in trouble.
Thom Hartmann: Yeah. Do they work? I mean in the United States we, the Obama administration came in and said okay we’re going to bail out the banks. And part of that bail out was the idea that the banks would then loan the money to people. And in fact they had a special program where banks could pay down the principal and or the, change the interest, pay down the principal, and deduct it and get re-made whole by the government, and the banks just chose not to do that for various reasons. Harshly it was not all that well structured, but mostly I guess it’s just more profitable for the banks to just hold onto people by the throat.
Brynja Halldórsdóttir: Well some things are doing more than the government is allowing them.
Thom Hartmann: You mean more good stuff.
Brynja Halldórsdóttir: Yeah. Like land sparking.
Lilja Mósesdóttir: Maybe to explain that is that actually.
Thom Hartmann: Interesting. Yeah, Lilja.
Lilja Mósesdóttir: The banks are collapsed, they rent into receivership. The government took them over. And the assets of the old banks that collapsed were moved into new banks with almost the same names. And there was a discount on the value of the assets when they moved from the old to the new. And the discount was on average 50%. So the new banks have quite a range, you know big range to write down, or give a hair cut on loans and housing loans. But the problem is that they are not doing it. Because when the new banks were established, the government struck a deal with the creditors and gave them an ownership in these new banks that put their assets in there from the old banks and the creditors will get a part of the recovery. If the recovery is more, if they recover more than the value of the assets moved to the new banks.
Thom Hartmann: Right. So, to convert, if I can hyper-simplify that. I think. It would be like if a bank took, had a mortgage for and I'll use dollars if it’s all right because I don’t think Americans would know Krona in the exchange rate. But if you had a house that was worth 100 thousand, that had a mortgage of a 100 thousand dollars, I mean the value of the house was 100 thousand dollars. And when the first banks failed they sold that 100 thousand dollar mortgage for 50 thousand dollars to the new banks. And then the new banks should have gone to the homeowners, the whole idea was go to the homeowners and say hey we bought this for 50 thousand dollars so now you only owe us 50 thousand dollars. But instead the banks said hey we bought this for 50 thousand dollars, and you still owe us 100 thousand and we’re going to get it. Is that right?
Lilja Mósesdóttir: Yeah. And on top of this we have indexed housing loans.
Thom Hartmann: Right. So if there’s any inflation, you owe us even more than a 100 thousand.
Lilja Mósesdóttir: The principal increases and it has increased by 40% since 1st of January 2008.
Thom Hartmann: Oh my goodness. So, and this has provoked the political crisis where you had two referenda and you had the government basically change, yes?
Lilja Mósesdóttir: Well, when the government changed it was because of people’s anger over the inability of the politicians to safeguard the interest of the public. You know, a lot of people saw the value of their assets erode. They had shares in the banks and suddenly they didn’t own anything.
Thom Hartmann: Yeah. So and yeah. And we saw much of this in the United States as well, not anywhere near as bad, but. So Lilja, if this was all caused by the banks having been deregulated by basically neo-liberalism, by what in America we would refer to as republican or conservative economic policies, less government, right. How is it that there are any conservatives left in Iceland?
Lilja Mósesdóttir: Yeah.
Thom Hartmann: We’re going to have some as guests later on in the program who say oh in fact we’re going to have a libertarian on and he says oh you know the whole problem was too much government regulation in the very first place. How can anybody say that having to live through this?
Lilja Mósesdóttir: You’re actually you’re talking to two people who are not conservatives, they are liberal.
Thom Hartmann: Yes, I understand.
Lilja Mósesdóttir: And their explanations for the banking crisis is the fall of the Lehman brothers. So it’s not their fault. And there are people, voters, who believe this still. But we had a truth commission established by the parliament in Iceland which kind of revealed what happened and how the owners of the banks actually robbed them from inside. So we have some facts that contradict this. But still people are supporting the conservatives in Iceland.
Brynja Halldórsdóttir: Surprisingly the polls are showing us that the independence party who is what is liberal or right green party and used to be in power for 18 years.
Thom Hartmann: By liberal you mean what in the United States we would call conservative.
Brynja Halldórsdóttir: Right wing, conservative, republican.
Thom Hartmann: May be better to use right wing and left wing.
Brynja Halldórsdóttir: Yeah yeah. The most right wing party, the polls are showing that they will have 50% of the vote if we were to have an election today.
Thom Hartmann: Now in many countries I’ve been in the right wing parties get the vote not by virtue of being right or wrong on economics but by things like in Denmark for example, the right wing folks mostly are just anti-immigrant or anti-Muslim or something like that. Is there something that unites? And in the United States, many right wingers are right wingers not because of economics, they don’t realize that they’re being economically taken advantage of, but they’re right wing because they’re afraid that the government wants to register their guns. Or they think that the politicians are not fundamentalist Christians or something like that. Is there some piece of the right wing party here and the right wingers that isn’t about economics that gives them that 50%?
Brynja Halldórsdóttir: That unites them? I would think hating the government.
Thom Hartmann: Really.
Brynja Halldórsdóttir: Yeah. Because in the last elections, the independence party had 25% of the poll. Still, after its bankruptcy. Still they had 25% of the vote. And I think most of those voters that are changing between parties every election, the undecided voters, they’re just listening to what they hear in the media. And a large majority of the people are really unhappy about what this left wing government has done, the one that our former party is in government with. Or just unhappy with a lot of things and therefore they decide to vote the independence party because they think that they will see a change.
Thom Hartmann: As if the government was responsible for that. And in a way the government was responsible for the failure because they didn’t regulate the banks in the first place. Well, like the US and Canada. Canada never had a banking crisis. Canada’s banks are doing just fine. They’re the most heavily regulated banks in the world. I, how, Lilja, how do, in just the 20, 30 seconds. How do people hold that? Is it just, is it, well let me ask you that again when we come back from the break because it just astounds me when there’s a fairly simple truth out there and people don’t acknowledge it. And I, so let’s talk, but the music is playing right now, we’re going to take a break. We'll be right back. This is Thom Hartmann, live from Reykjavik, Iceland. And stick around we’ll be right back.
We'll be right back from Iceland. Stick around. Thom Hartmann here with you.
Thom Hartmann: Welcome back, Thom Hartmann here with you, broadcasting live from Reykjavik, Iceland. Where it is well into the afternoon, into the early evening in fact. And with me, let me change pages here. With me is Lilja Mósesdóttir and Brynja Halldórsdóttir. Yeah I’m mangling them both.
Brynja Halldórsdóttir: No, that’s great.
Thom Hartmann: That’s okay.
Lilja Mósesdóttir: You’re getting closer each time you pronounce it.
Thom Hartmann: One of these days. So I think that dissatisfaction with government is something that politicians always seem to use. Here in the United States we have the Republican party is basically running on a platform of let’s have no government, let’s deregulate everything, let’s just leave it all alone and everything will be wonderful because the free market works everything out. And this is the message of the right and the economic right as well. And it’s almost, increasingly in the United States, people are I think calling this out as really a corporatist position, not a left or right position, but really it’s corporations versus the people. And I’m curious. I know Brynja you’ve done work about the Mosque, the building of a Mosque here, you’ve written up about it, or maybe not.
Brynja Halldórsdóttir: No I didn’t do that.
Thom Hartmann: Okay and the police and food and fairness, maybe I have it, somebody else. But I’m curious your thoughts on in the US the Occupy Wall Street movement. Is there anything going on like that here? Is that why the two of you have left what was already you know kind of the equivalent of the left wing part of the democratic party in the United States. The established left party. You have left that. Is, your thoughts?
Brynja Halldórsdóttir: We actually have a small movement.
Thom Hartmann: An occupy movement?
Brynja Halldórsdóttir: Yeah. Who doesn’t have that.
Thom Hartmann: Occupy Reykjavik.
Brynja Halldórsdóttir: Yeah, we actually have that. People are camping outside of our Parliament. That’s not the reason why I left the green, the left green party. I decided to leave it for months actually. The EU betrayal was the biggest reason. IMF was another. The environmental issues is another. We still being in NATO is another and many, many other reasons.
Thom Hartmann: So basically you are, your position would be Iceland for Icelanders and leave us alone or?
Brynja Halldórsdóttir: No, isn’t that a bit racist?
Thom Hartmann: Well I didn’t mean it in a racial context I meant it more like this is our country we don’t need to merge with NATO and we don’t need to merge with the EU.
Brynja Halldórsdóttir: Well my meaning is that we should just be independent.
Thom Hartmann: Economically?
Brynja Halldórsdóttir: Yeah.
Thom Hartmann: Politically, militarily?
Brynja Halldórsdóttir: Yeah. I’m a pacifist. So that’s the reason why I don’t want to be a member of NATO. And we don’t have an army, we don’t need an army, and we should not align with people who kill all the people, basically.
Thom Hartmann: Yeah. Yeah.
Brynja Halldórsdóttir: And EU is, well firstly because I am pro-democracy. If we entered the EU then we would give a lot of our powers to some, some bureaucrats in Brussels.
Thom Hartmann: To technocrats, yeah.
Brynja Halldórsdóttir: Just really shocked me. But of course there are many, many reasons.
Thom Hartmann: And Lilja, your thoughts on the difference between democracy and what’s happening now and the question I asked both of you before the break, you know. How could it be that the people twice voted to tell the bankers to go to hell, basically, and the government still won’t do it?
Lilja Mósesdóttir: Well, the government has been saying that the people of course don’t want to pay higher taxes, that’s why they voted against it. And it should never have gone to a referendum. These questions whether to give a state guarantee on the deposits of the old banks that went bankrupt. So they, that’s what they have been saying all the time. All people never want to pay higher taxes and it would mean higher taxes.
Thom Hartmann: So if we do what the people said, it will cause us to raise their taxes and they’ll be even more unhappy with us. But already they’re, nobody is very happy.
Lilja Mósesdóttir: No, no. But if you compare the situation in Iceland with that of the US. You know the Occupy Wall Street is about the blue inequality, you know the inequality between the richest 1% and the 99%.
Thom Hartmann: Yes.
Lilja Mósesdóttir: And then you say in the Midwest you have a red inequality, you have inequality between those who have university education and other ones who never got the opportunity to go. And I say well we have a purple inequality in Iceland. Inequality has been increasing after the crisis between those who had debt when the bank crashed and those who were without any debt. Because as I said, those who only had deposits, they were fully guaranteed by the taxpayers. Not, you know we had a blanket deposit guarantee by the taxpayers. And we had to increase taxes on people who didn’t have any deposits in the banks in order to finance this. And those who did not have deposits in the banks they have debt they had loans and they have increased by 40% and they are not being written down. They are in fact increasing in volume.
Thom Hartmann: Well. And the vulture banks, I understand there’s these vulture banks have something to do with this? These banks that bought these depreciated assets.
Lilja Mósesdóttir: Sharks we call them. The sharks.
Thom Hartmann: The sharks.
Lilja Mósesdóttir: Yeah they are here in Iceland. They own two of the three banks.
Thom Hartmann: They own two of the three banks? They bought these things on pennies on the dollar.
Lilja Mósesdóttir: Yeah. They even got a more discount under 50% of what you’re talking about because they bought these assets that had been written down by 50% even, 10% value.
Thom Hartmann: So the people lose and the bankers are making out fine. Is there any, in the minute we have left. What could take Iceland out of this?
Brynja Halldórsdóttir: Right now?
Thom Hartmann: Yeah.
Brynja Halldórsdóttir: Well what they should have done is that we should not have bailed out the banks. We should have secured a pat of the deposits.
Thom Hartmann: But it’s too late now for should haves. Going forward, what do you do?
Lilja Mósesdóttir: The people have to rise up. The people who are suffering from the great indebtedness.
Brynja Halldórsdóttir: And we should have a say in important matters.
Thom Hartmann: Say that again?
Brynja Halldórsdóttir: We should have a say in important matters. We should have a lot of referendums on important matters.
Thom Hartmann: So you’re advocating more direct democracy.
Brynja Halldórsdóttir: Yes I am.
Thom Hartmann: You’re saying if the people say it, damn it, do it, to the government, essentially.
Brynja Halldórsdóttir: And the government should listen to the referendum.
Lilja Mósesdóttir: We need to get rid of the cronyism in Iceland, we need to get rid of these old parties and the elites who are in power after the crisis and were before the crisis.
Brynja Halldórsdóttir: And more segregation of powers of course.
Thom Hartmann: There you go. Thank you very much. Thank you both so much for being with us today. We’ll be right back from Iceland.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.