Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Did Iceland Run a Giant Ponzi Scheme to Scam British Savers?

Politics / Credit Crisis 2010 Jan 06, 2010 - 06:28 AM GMT

By: Nadeem_Walayat

Politics Best Financial Markets Analysis Article

Iceland is refusing to repay the £2.3 billion that British Tax payers put up to temporarily bailout Icelandic banks operating in the UK following the 2008 Financial Crisis.

The President of Iceland played the victim card by stating that he would refuse to sign a bill passed by the Iceland's Parliament that authorised repayment of £2.3 billion owed as a consequence of the bailout of British savers in Icesave. Instead President Grimsson stated that he would instead hold a referendum on the bill which has ZERO chance of being passed hence there will no repayment.

Clearly Icelanders live in a fantasy land where the warped sense of reality of playing the victim when in fact the REAL victims were ordinary savers in the UK that were hoodwinked into depositing their hard earned savings into Icelandic banks such as Icesave in what they assumed and rightly so were ZERO risk deposit accounts.

The Icelandic government in October 2008 announced that they either could not or would not honour their liabilities at the time and were grateful to the British Government stepping in to prevent a chain reaction of panic across all foreign banks that held UK deposits.

Now over 12 months later, Iceland has defacto decided to default on the £2.3 billion as though it is not Iceland's responsibility. In effect iceland has Madoff style stolen the life savings of thousands of ordinary British citizens and were it not for the British Government stepping in to cover these monies that they were never obliged to do, then there would be rioting on the streets of Britain as hundreds of thousands demand action to be taken against Iceland's Ponzi Government much as those that lost money as a result of Madoff's Ponzi scheme demonstrated and demanded justice but who were not bailed out by the US government.

So that there is no confusion of who is the REAL victims are:

The Icelandic piped piper banks came to British high streets and enticed ordinary british savers to walk through their doors or website portals and deposit their hard earned life savings into their institutions on the promise that there was zero risk on ordinary savings accounts. i.e. we are NOT talking about stock or bond portfolio's but just ordinary savings accounts.

Then on October 7th 2008, savers woke up to find that they had been frozen out of their bank accounts and their money had apparently disappeared into the back pockets of Icelandic Bankster's overnight as the Icelandic bank officers had used savers monies to gamble on derivatives and pay themselves bonuses on fictitious profits that were in part recycled back to iceland to build up Iceland's internal infrastructure.

I did try and warn people at the time (without incurring the wrath of specific banks legal departments) specifically about Iceland BEFORE they FROZE / STOLE peoples savings, of the risks of bankruptcy of countries for savers and that I would definitely be wary of holding any cash in foreign banks.

Iceland Going Bankrupt?

barely 4 days have gone by when I wrote that the current credit crisis will in all likelihood claim a number of countries along the way, where bankruptcy will manifest itself through the hyperinflation of governments printing ever larger quantities of money to cover expanding bad debts taken on the back of bailout after bailout as the economies deflate and bankrupt banks are nationalised.

Now Iceland seeks to rescue all of its collapsed banks, Kaupthing, Landsbanki, Glitnir, Straumur-Burdaras, Exista and Spron. The shares have already been suspended whilst the politicians prepare to rescue the banks from potential bankruptcy.


Iceland the Northern Rock Country

We had the first signs during the morning of the first european country fast on the road to bankruptcy, Iceland which is outside of the Euro currency block experienced a collapse in its currency the Icelandic Krona following its governments panic moves to prevent a collapse of its big banks as the following article suggested could lead to a bankruptcy of the country- Iceland Going Bankrupt?

The latest news on the Iceland front is that the Government is seeking to take immediate control of all of the Icelandic banks which includes nationalisation of Landsbanki and Glitner and force the other banks to take state loans. UK customers of the Icelandic subsidiary bank, Icesave found that they were unable to withdraw funds during the day which I warned as strong possibility in my earlier article. However the funds are protected both by Iceland's own guarantees and the UK FSCS picking up the balance, therefore any account freezures 'should' be temporary, and neither will savers be hit by the collapse of the Krona as savings tend to be in sterling or euro's. However savers should at the first opportunity seek to repatriate their savings to a 100% UK bank as the consequences of a country going bankrupt could render guarantees meaningless.

The consequences of reneging on the agreement that covered the depositor liabilities of Icelandic banks operating in the UK is that Iceland would is to be frozen out of the international money markets and really would be treated as a financial terrorist state.

I hear calls from some people such as Mike Shedlock that Iceland is right to effectively steal the hard earned savings of depositors as he writes:

Iceland's President Tells UK Go To Hell, Hooray For Iceland

You Take Risk, You Pay The Price

This case is easy. There is no free lunch. Extra yield comes with risk. If you take risks, you pay the price. Icelandic citizens should not have to bear the brunt of this folly. I commend Iceland for telling the UK and Netherlands where to go.

Mikes article is flawed on several points concerning deposits in Icelandic banks by British savers which I will elaborate upon -

Firstly Icelandic banks were NOT PAYING EXTRA YIELD for EXTRA RISK !

The IceSave rates were competitive but NOT the TOP PAYING RATES in the UK. There was nothing and I mean NOTHING to imply that Icelandic bank savings accounts carried ANY MORE RISKs than ANY other Savings Account in the UK, as the rates were NOT the BEST RATE OF INTEREST as the following analysis from August 2008 illustrates:

Financial Institution Interest Rate Fixed Period Minimum £ Comments
ICICI 7.20% 1 year £1,000 HiSAVE Fixed Rate - Indian bank - 7% for longer fixes (without early withdrawal) . The bank is registered with the FSA. Customer service is reported to be very poor.
FirstSave 7.10% 1 year £1,000 Can fix for 1 to 3 years. - Part of First Bank of Nigeria Plc. The bank is signed up to the Banking Code and registered with the FSA.
Icesave 7.06% 1 year £1,000 Can fix for 1 to 2 years. - Icelandic bank, press voice credit crunch problems which means it would be more complicated to get your money back if the bank went bust as Euros 20k from Iceland, and balance of the 35k from UK.
Anglo Irish Bank 7.06% 1 year £500 9 month bond is 7%,
Bradford & Bingley 7.0% 1 year £1,000 Also pays 7% on 2,3 year bonds. Only one problem, Bradford and Bingley could be the next Northern Rock !
Cahoot 7.0% 1 year £1,000 Available until 31st Aug 08 or earlier if fully subscribed.


Secondly the Icelandic banks specifically GURANTEED that Savers deposits were SECURE Upto Euros 20,000, with the balance covered by the UK FSCS. So Icelandic banks in effect LIED to savers to entice them to deposit their hard earned cash into the Icelandic Ponzi Scheme Madoff Style.

When a countries banks lies to their British customers then HOW is it the fault of the Victims ?

It is amazing how the facts become warped over time, as the savers of Britain were told that the RISK is ZERO and the RATES were NORMAL!

Iceland plain and simple SCAMMED British Savers out of their hard EARNED savings and Now refuses to repay the monies loaned from the British tax payers to cover Iceland's liabilities. Therefore it is RIGHT for Britain to invoke anti-terror laws to seize the assets of a defacto Financial Terrorist State. Britain has enough of its own financial crisis problems of its own making without now having to import the consequences of financial criminals abroad as well.

Iceland should honour its agreement to repay the debt over a period of time, just as a Bankrupt Britain had to do following the second world war when the Britain agreed to repay the accrued debt of all of the purchases from the United States during the war over the next 50 years or so. The United States did not forgive this debt, and nor did Britain walk away from the debt, Britain acted in an honourable manner that sowed the seeds of Britain's place at the heart of the global financial system.

Lets hope that in a few decades time when Iceland's banks next start playing the piped piper on British High Streets that people remember that THEY CANNOT BE TRUSTED AND WILL DISAPPEAR IN A PUFF OF SMOKE WITH YOUR HARD EARNED SAVINGS! The same goes for anyone thinking of investing in Iceland as your money will be scammed off of you.

The IMF itself should be wary of loaning any funds in the wake of Icelands debt default as it is unlikely they will get any of the monies back. Similarly it is unlikely that Iceland would be allowed to join the European Union.


By Nadeem Walayat

Copyright © 2005-10 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


06 Jan 10, 12:46
It is not Icelands fault

No they did Not!

This was the work of Goldman Sachs!

Ice save had its money invested on wall street in the mortgage backed derivatives.

Goldman crashed them on purpose and made massive profits taking out Ice Save.

And many others around the Globe.

All the money of those savers is in Goldman Sachs account not in Iceland.

Cap Matifou
06 Jan 10, 13:00
The way out for everybody

The only solution is the issuance of debt free money, to ensure the exchange of work and goods. This is what Lincoln did 145+ years ago, drawing the following fourious commentary from the London Times (telling basicly a secret, how to break away from the debt slavery scam):

"If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed, or it will destroy every monarchy on the globe."

Michael Hess
06 Jan 10, 15:40
Risk not obvious?!

You write "There was nothing and I mean NOTHING to imply that Icelandic bank savings accounts carried ANY MORE RISKs than ANY other Savings Account in the UK [...]". This is complete rubbish. Even the popular financial press in the UK (specfically, "Money Week") ran several pieces that explicitly stated that Icelandic banks were extremely risky, months before the meltdown. I considered opening an account with these banks, and decided against it precisely because of such well-publicised considerations.

06 Jan 10, 16:40
Iceland Scam

Icelandic banks were extremely risky As WAS NORTHERN ROCK A YEAR BEFORE !

BUT !!!



You forget that at NO POINT in ANY PRESS was Iceland defaulting on its AGREEMENT to cover the first 20,000 euros until the 7th of octobe 08

The Risk was Northern Rock style inconvenience, NOT risk of ZERO return on deposits!

if you read my article above, you will see I even said this on the 2nd of August 2008 with regards the risks of opening an Icesave account.

Mar K
07 Jan 10, 04:20
Iceland's obligations

The privately owned Icelandic bank Landsbanki accepted deposits from British and Dutch savers into the so called Icesave accounts at high interest rates. As Landsbanki operated as a branch and not a subsidiary the Icelandic Depositors' and Investors' Guarantee Fund guaranteed the deposits. The Fund was set up in accordance with the EU directives. The Icelandic legislation, modeled after the directives can be found here: "". It is stated in it that "the total assets of the Deposit Department of the Fund shall amount to a minimum of 1% of the average amount of guaranteed deposits in commercial banks and savings banks during the preceding year". So the Fund didn't really have a lot of money. There is no mention of the Icelandic State being further obliged to guarantee deposits.

The Icelandic public didn't benefit from these deposits. Some Icelanders borrowed extensively to finance their expensive lifestyle, and maybe the loans were partly financed by these deposits. But those who borrowed still owe.

When the British and the Dutch reimbursed savers for their deposits, they acquired their claims on the Landsbanki bankrupt estate. The Emergency Act passed by Althingi in October 2008 dictates that depositor's claims are priority claims, so the British and the Dutch governments will receive payments for most of what they claim, no matter what.

07 Jan 10, 05:39
Icesave Gaurantee

This is what Icesave stated to its customers / prospective customers before October 2008 -

Deposits made with Icesave are protected under the Icelandic Deposit Guarantees and Investor-Compensation Scheme (details of this scheme may be obtained from Payments under this scheme are limited to the first €20,887 (or the sterling equivalent) of your total deposits held with us.

You have further protection from the UK Financial Services Compensation Scheme ( Payments under this scheme are limited to 100% of the first £2000 of all your deposits with us, plus 90% of the next £33,000 of your total deposits with us, less any payments made under the Icelandic scheme. This means that the maximum claim amount as at June 2006 is £31,700.

As is usual with scammers, they can hide a way documents in the dark recesses under obscure headings to conjure out of thin air when they choose to, whilst in the meantime have been busy lieing to prospective depositors on the actual protection.

07 Jan 10, 23:17
It's the people!

The government of Iceland is all for paying back the money; it the people of Iceland that refuse to pay back what the bankers stole.

Maybe if the bankers were rendered penniless and their sorry backsides tossed in prison the people of Iceland would rethink their obligation to repay the depositors.

But as is stand now, the only people that are going to pay are average citizens and I applaud them for saying HELL NO!

08 Jan 10, 08:48
Iceland is NOT refusing to pay

It is a common misunderstanding that Iceland is refusing to pay the deposit guarantee. This is not true. Previous to the law currently being discussed all over the world, the Icelandic parliament had already, this summer, passed a law to pay the guarantee and the Icelandic president had already signed that law.

However, the British and the Dutch governments were not satisfied with that law because there were safeguards in there to prevent the country from becoming bankrupt. So the British and Dutch governments essentially acted as mafia loan sharks and put a gun the collective heads of the Icelandic population and dictated loan terms that the Icelanders had to accept or else go bankrupt right away.

Many Icelanders feel that it is cleaner to go bankrupt right away than make their children go bankrupt later.

I think most Icelanders are ready to take a fair share of the responsibility and pay a fair share of the money lost by the depositors. I am personally of that opinion. We should, however, not forget the facts of the matter:

1) The banks were private corporations, not owned, backed or insured by the Icelandic government.

2) An insurance fund, similar to the US FDIC was set up, and similar to the FDIC, funded collectively by the banks, all in accordance with EU directives.

3) Such an insurance fund can never handle a systemic failure of the whole banking system, and, of course, it didn't. Such a fund relies on the remaining banks for funding and when there are no remaining banks there is no such funding. It is commonly acknowledged that such funds are not intended to be able to handle such systemic banking system failures.

4) The legal basis for making the Icelandic tax payer liable for these private losses is highly questionable and not settled, to say the least. In fact such a conclusion would in my mind lead to a very high degree of moral hazard for the whole of international banking. Such a conclusion could also be a catastrophe for countries with large banking systems, such as the UK or the US.

The world financial system is in deep trouble. We need to be very careful what principles we use to solve our problems.

Snorri Agnarsson

Reykjavík, Iceland

08 Jan 10, 17:17
We Reap What We Sew

As a British taxpayer I clearly want the monies repaid on the best terms for us, after all we are in a complete mess financially ourselves.

However, I have every sympathy for the people of Iceland who are suffering, the majority of whom don't deserve being financially pillaged. I do accept that their standard of living accelerated artifically the last years due to the wealth effect of what was broadly a hedge fund state.

Lets not forget, as British citizens, there are many similarities with the Icelandic predicament with a wealth trickle down from shuffling paper.

So, I hope we get "our" money back, but fear we are simply witnessing our own future where naturally we will expect to be treated more fairly than the Icelandics, for the greed of the few (and the lack of intelligence of the many). Politicians are among the elite who sit comfortably in either of these buckets.

Crippled by private and now sovereign debt, the empire crumbles and wealth will leave this island too. In the capitalist system man exploits man, in the socialist system it is the other way around .... and that is the real tragedy. Lest we forget the Treaty of Versailles.

Paul G
09 Jan 10, 14:47
Do as I say not as I do

I have not followed the Iceland affair closely as I never invested with them but listening to interveiws with the Icelandic president I have not heard him say that the Icelanders are not on the hook for this money but that they simply can't afford to pay it.

This is in fact the same argument that our own government has used against Equitable Life investors where they have admitted liability for failing to supervise the company but refuse to pay compensation to all the investors who lost their savings as a result because of the cost.

Mandy Allen
07 Mar 10, 04:53

Now that they have refused to pay our money back I doubt they will be allowed to join the EU.

They're going to be left out in the cold.

And it's mighty cold where they are.

16 Apr 10, 05:58
Iceland is willing to pay back

Iceland is willing to pay back the amount of money that was used to indemnify the Brit citizens... Every Brit citizen has been made whole for their losses.... Iceland is not agreeing to the ridiculous fees that are being included in their bill to repay......... I don't know when the idea of getting rich (or richer) off people in need became acceptable... I guess the same time getting rich off sick people became the right thing to do......

Your story is misguided.......

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules