THE
ICELAND DEBT REFERENDUM
MARCH 6th 2010
The Prime Minister of Iceland thinks (and states) that it was by
offering his citizens a referendum on whether or not Iceland should pay
its debts of principal and interest that he succeeded in getting the
terms of the payment improved. The truth is that offering a referendum
was an act of unparalleled folly which could well have led to confusion
and disaster. To pretend to the Icelandic people that have the power to
decide on such things while remaining within the entire panoply of
international legislation and protection, all of which the average
citizen in all of the world's nations are blissfully unaware was, I
will accept, forced on his administration as a way of remaining in
office and achieving some pretense of regaining control of a situation
brought about by extreme opportunistic negligence over the previous
decade. Most of the Icelandic public have said they do not believe they
are liable to pay the debt at all, let alone on the terms first
suggested. For their Prime Minister to tell them they have the power to
make this decision on national policy is typical of the delusions that
citizens of the modern world suffer from collectively. They believe
they have MONEY, sometimes, and that governments have NO MONEY, because
governments are fond of saying this when asked to pay for public
services. The truth is more complicated.
The value of
money is no longer associated with the market value of coins, whether
that be high or low, or with paper notes. It's value is dependent on
the credibility of the guardian and arbitrator of any given currency,
as judged in the global scales in which all global currencies are
weighed. National Governments are the guardians and arbitrators, even
if they subcontract the mechanics of their national or central (in the
case of the Euro) banking operations to a body barred from involvement
in political decision making beyond the purely financial and monetary,
while the government is barred in turn from manipulating the interest
rate. Such operations as Quantitative Easing can be carried out as a
matter of judgment when bubbles of notional wealth are burst, but only
when general liquidity has been sucked from the system to the extent
that trade in goods and services is threatened. That is why appropriate
Quantitative Easing is not inflationary, but the hysteresis in the
system, the trousering of surpluses and the global black markets of
various kinds means that hawk-eyed monitoring and serious international
cooperation at the highest level is a sine qua non of these operations.
As individuals
we can own goods and property. They value of these are the market
value. We do no own money as such, we have a credit account with a
national bank. If that bank goes bust we have lost all of that money.
This has been happening regularly in various parts of the globe over
many years. To tell Icelanders they have the right to not pay their
debts is telling them they have the right to send themselves down the
plughole leaving them only with goods and property (if they have these)
which they can sell if they wish for whatever currency a buyer may have
that they are prepared to accept. They can use their domestic currency,
the Icelandic equivalent of Harold Wilson's famous 'Pound in your
Pocket', between themselves, whatever its value outside, but as they
now realise they need goods and services from outside Iceland. In other
words, stability and international support is a necessity unless they
wish to go to war and appropriate these as was done in the middle ages
when bows and arrows had a limited destructive effect on the
infrastructure, however painful it may have been to get one in the eye.
Today, we are adults apart from the fundamentalist throwbacks.
In summary, it
is time to be clear that referenda are not permissible unless every
clause and paragraph of every international (and domestic!) item of
legislation is ratified by referendum. That is tantamount to having a
referendum now to approve the status quo, whatever it is, before moving
on. I would not advise that as there many things that have to be
modified and developed as circumstances change. Most of our laws are
tentative, the result of the latest thinking on how best to run our
affairs in the best interest of maintaining a civil society. We do this
by dialogue and debate on options put before parliaments in
representative democracies. A referendum cannot be held on any policy
unless the probable consequences of the yes and no vote are set out and
these are fully accepted as possibilities. A referendum should only be
held if its aim is to bind a nation long term, beyond the life of
elected parliaments. Even then a referendum is not for ever.
The Icelandic government will ignore their referendum and save face by
saying that it not longer applies as the terms of the deal no longer
apply. However, unless they and the rest of the world have learned a
terrible lesson from this they will have started a trend in political
idiocy that could lead to worse.