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October 8, 2008 Weblog:

Credit Crisis Claims Iceland

Iceland is nearing economic collapse as its second largest bank has been nationalized by the government.

The most free-market of the Nordic countries, it seems as if Iceland has been too heavily involved in the credit markets for the last 15 years. The Guardian reports:

Inflation and interest rates are raging upwards. The krona, Iceland's currency, is in freefall and is rated just above those of Zimbabwe and Turkmenistan. One of the country's three independent banks has been nationalised, another is asking customers for money, and the discredited government and officials from the central bank have been huddled behind closed doors for three days with still no sign of a plan. International banks won't send any more money and supplies of foreign currency are running out.

In a telling turn of events, Iceland has had to get a loan from cash-rich Russia to help stave off collapse. The Prime Minister of Iceland has reportedly stated,

"We have been calling for aid from neighboring countries and have been turned down. In times of crisis, one has to look for new friends."

October 8, 2008 Weblog:

Why $700 billion Won't Work

Nouriel Roubini, one of the economists who successfully predicted the subprime crisis years ago, has been allowing full access for the time being to his blog: RGE Monitor.

Roubini, once considered a perma-bear (a perpetual pessamist about the economy) has recently looked at banking crises historically to find the best way to prevent a total economic meltdown.

Surprise, surprise, he found that the US $700 billion plan may not be the best way to go. Instead, he suggests that the way Scandinavian countries (Norway, Sweden, Finland) dealt with previous crises, may be the better method.

To understand how this works on a more understandable level, Planet Money, a spin-off of the award winning radio show This American Life has been putting out some great radio about the credit crisis and solutions.

September 26, 2008 Weblog:

Inside the Deal to Save the US Economy

A strange and incredible amount of information is flowing from the Guardian about the inner workings of the $700 billion deal between Republicans and Democrats to bail out the US economy.

It's tough to judge what is real and what is fake but there some incredible stuff coming out.

According to one report, a deal had been reached by all parties until a group of hard-right, free-market Republicans met privately with McCain and threw a new "free-market" proposal into the mix.

Their behaviour at the meeting was a study in contrasts, according to press accounts. Obama, granted deference by his fellow Democrats, led off the debate.

Then [Republican minority house leader] Boehner made his move, throwing down a plan that differed wildly from the one under discussion. McCain, asked for his opinion, stayed silent - and that, according to those at the meeting, was taken by his fellow Republicans as a sign of his support for the Republican revolt.

Ironically, a Republican on the Senate banking committee, Richard Shelby, was doing his best to paraphrase the thesis of Naomi Klein's Shock Doctrine; that in a state of crisis the ideas lying around are the ones which get used:

"They're trying to push this in an emotional state, saying the sky's falling on our heads," he said. "Every time we have rushed to judgment in the past, we have paid for it."

September 23, 2008 Weblog:

American Investment Industry Vanishes

wall street.jpg

With the bankruptcy of Lehman Brothers, the sale of Merrill Lynch and the subsiqent transformation of Goldman Sachs and Morgan Stanley, the titans of Americas investment industry has now been wiped off the map.

How bad is it and what does it mean?

A couple of US Congress members who had a nice little chat with the US Fed Chairmen and the US Treasury Secretary had this to say last Friday:

"We’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally. Somber doesn’t begin to justify the words. We have never heard language like this."

But is it all a smoke-screen designed to give the Fed and Treasury complete control over bail-out money? According to economist Paul Krugman:

"Mr. Paulson insists that he wants a "clean" plan. "Clean," in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review "by any court of law or any administrative agency," and this adds up to an unacceptable proposal."

September 14, 2008 Weblog:

Subprime Crisis Claims Another Major Bank

First a series of mortgage companies. Then UK bank Northern Rock. Then Bear Sterns, followed by Fannie Mae and Freddie Mac.

Now another major US bank, Lehman Brothers, is about to crumble under the weight of disastrous decision making in the wake of the subprime mortgage crisis and ensuing credit crunch.

Lehman Brothers controls almost $700 billion in assets. According to the Guardian, the US authorities have authorized emergency trading of Lehman's shares should it file for bankruptcy.

Though the US bailouts of Bear Stearns, Fannie Mae and Freddie Mac were supposed to prevent a 'domino effect' of US banks collapsing, it appears banks are failing anyways.

Should Lehman Brothers, the fourth largest bank on Wall Street collapse "it will be one of the biggest failures in Wall Street history"...again.

September 14, 2008 Weblog:

BC forestry industry "in a tail spin"

BC finance minister, Colin Hansen, has just released a report showing that forestry revenues in BC are down by 36 per cent.

Hansen was quoted in the Tyee's new election blog "The Hook" as saying: "The downturn we are seeing in the forest sector is unprecedented. Since 1993 it has never even come close to being that low."

The pine beetle, sub-prime crisis, high dollar and a series of forestry strikes in BC have all contributed to the downturn which the NDP finance critic Bruce Ralston characterized the industry as being "in a tail spin".

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The Dominion is a monthly paper published by an incipient network of independent journalists in Canada. It aims to provide accurate, critical coverage that is accountable to its readers and the subjects it tackles. Taking its name from Canada's official status as both a colony and a colonial force, the Dominion examines politics, culture and daily life with a view to understanding the exercise of power.

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