Offshore króna holders with interesting friends
Holders of Icelandic offshore króna holders seem to have gained some intriguing friends. A so-called think tank, Institute for Liberty with the slogan “Defending America’s Right To Be Free” has suddenly found the urge to set up a project called “Iceland Watch” with its own website, specifically to follow, it seems, how Icelandic authorities deal with offshore króna holders (inter alia linking to some of my blogs).
The focus of interest, according to the Institute, is the following:
“The Institute for Liberty has followed Iceland’s path to recovery since the 2008 collapse and has developed an increased concern over recent protectionist economic policies like the discriminatory practices against offshore króna investors.
“In creating Iceland Watch, we aim to keep the public apprised of any anti-democratic and anti-free trade policies put into place by the Althingi, Iceland’s parliament, which could threaten the property rights of offshore investors in Iceland’s króna.
“Holders of Iceland’s offshore krona include several American investors, which serve a variety of retail investors like retirees with 401k plans and institutional investors such as corporate and public retirement plans, foundations, and endowments.
“Despite investors’ willingness to support Iceland during its time of transition and several distinct offers to negotiate good faith solutions, the Icelandic government refuses to offer anything other than a clear take-it-or-leave-it scenario. The discrimination against foreign investors is disturbing and could affect millions of American holders of 401k and retirement accounts.
“When Iceland’s parliament, the Althingi, convenes its Summer Special Session on August 15, its actions will indicate whether the island nation will reintegrate itself into international free markets or further its isolation by instating new costly, misguided policies that chill investment and economic growth.”
The Institute’s website indicates it’s also interested in Puerto Rico’s debt, another place where American investment funds struggle to get repaid. More intriguingly, the Institute has also fought Obamacare and other typically far-right interests.
Indeed, the Institute is part of ad hoc networks of “think tanks,” non-profit organisations and ,,grassroots” organisations funded by far-right American billionaires such as David and Charles Koch and the hedge fund owner Paul Singer, who for years fought the Argentinian government, now a settled issue.
The Institute is mentioned in Jane Mayer’s insightful and well-documented analysis of the money powers on the right-wing of the Republican party, far more right-wing than the mainstream Grand Old Party is. Powers, that for a few decades have pumped money into setting up phoney “grassroots” organisations in support of the tobacco industry, against environmental issues and lately, Obamacare. Mayer’s book, Dark Money; The Hidden History of the Billionaires Behind the Rise of the Radical Right, came out in spring, an essential read to understand the undercurrents in US politics the last decades and the issues behind political funding, now open to anonymous donations, and the Citizens United ruling in 2010.
According to Mayer, Institute for Liberty got lucky with funding, yet another node in the efforts to fight Obamacare; in 2009 it received $1.5m:
Four hundred thousand dollars of these funds were channeled back to DCI Group (Washington PR company, instrumental according to Mayer in fighting Obamacare) for “consulting.” The previous year, the Institute for Liberty’s entire budget had been $52,000. Suddenly it was so awash with cash that the group’s president, Andrew Langer, told the The Washington Post,‘ “This year has been really serendipitous for us.” He said a donor, whom he declined to name, had earmarked the funds for a five-state advertising blitz targeting Obama’s health-care plan. (Mayer, p.192).
As I’ve pointed out earlier, there have been some articles popping up here and there – op-ed in WSJ, guest blog on FT Alphaville and the most recent on The Street, “Iceland Should Learn From Argentina’s Bad Example” by Aldo Abraham, an Argentinian academic.
No need to point out that of course all of the media rumbling is orchestrated, driven as it is by non-journalistic input; as seen from Mayer’s book the DCI Group has links to the Institute. Everyone fights their turf as best they can, the links to the knights of dark money is rather unsettling but “à chacun son goût.” It is intriguing to see the cause of Icelandic offshore króna holders as part of this picture: not necessarily surprising but yes, intriguing.
The Princeton economist Angus Deaton, summarises masterly in his powerfully argued “The Great Escape” that the worrying trend in US politics is the tendency of interest groups to buy influence in Washington.
As spelled out in earlier blogs Argentina is potentially a worrying example for Iceland: it fought creditors and then settled after a decade of costly legal wrangling, beneficial for the lawyers involved and corrupt powers but deeply deeply harmful for Argentina. In Iceland, voices similar to those Argentinian politicians who fought the Argentinian debtors can be heard. Elections are coming up in October, politicians will hardly strife to be on the side of foreign creditors although successful plan last year re the estates of the failed banks, based on agreement with creditors, is a positive argument for co-operation with creditors.
Views vary: some claim Iceland’s cause is wholly different from Argentina. However, although Iceland has graduated from the earlier IMF program the Fund is still closely connected to Iceland; it’s difficult to imagine that the Fund’s views will be ignored. Happily, Iceland is blossoming and, according to the latest IMF report, has more than gained what it lost on the crisis, i.e. it’s difficult to argue for any emergency actions. In the end, Iceland will have to decide on the best course to follow so as to adhere to the rule of law and further prosperity.
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[…] is an earlier blog on the offshore króna problem and potential litigation; here is the latest one on offshore króna holders and their US political […]
Liberalising capital controls on Icelanders – who don’t really notice at Sigrún Davíðsdóttir's Icelog
19 Aug 16 at 10:11 am
Sigrún,
The off-shore Króna hedge-hopers, hoping to profiteer from buying up Icelandic Króna held off-shore at low rates when things were down, then pushing for full-value sell-back, using cooked publicity and use of U.S. courts as world-courts for international trade to leverage national angst to coerce settlements on the terms they dictate, as Singer et al did to Argentina, are up a tree and sliding toward making themselves monkeys.
The element that “monkey-wrenches” their plan is the Icelandic banks having been privatized well before, and with no relation to (at arm’s length) the events of 2003 to 2007 that produced the situation the hedge-hopers hope to manipulate to profiteer: The International Icelandic banks, and all debt they accrued, even that accrued for government requirements, such as depositor guarantees, is private debt. The debt was/is bank debt, not Icelandic debt. Sovereign Iceland is not a guarantor of the debt, so the Icelandic government has “no skin in the game”. The government of Iceland is outside, like Russia in the negotiations between the U.S. and Syria, and Rusia, France and Germany between the Eastern and the Western Ukrainians, and like TIF was outside the Icelandic Banks v. Britain and Holland argument over payout of depositor guarantee costs.
Even though Iceland re-nationalized the domestic components of the private International Banks, Iceland did not nationalize the debts accrued by the banks as private entities. Thus, the government of Iceland has, the last few years, been a third party, trying to help the two principle parties resolve their differences and settle affairs so everybody can go back to business as normal.
For this Iceland could accept all inputs from all disputing parties, make suggestions for solutions, hear arguments to these, determine then, at last, a resolution solution, and present its resolution solution as a take-or-leave proposition from the final arbiter in the situation.
There is no legal recourse. The only questions that the hedge-hopers could take to a court would be if the government of Iceland did or did not have authority to act as final arbiter, or if the applicants to the court might be granted privilege to apply to another intermediary agency for a ‘re-hearing’ of the matters.
Iceland being sovereign, there is no question of Iceland having authority, so that would go nowhere, and Iceland being the final authority, another arbiter would be subsidiary, any ‘solution’ it came up with being required to be submitted to Iceland for Iceland’s approval, or rejection.
There is an old American political saying, that “If you can’t lick ’em with logic, baffle ’em with bullshit.” The evidences appear to indicate the “Institute for Liberty” actually a “Braintrust for Bullshitters” taking a flyer to see if they could maybe pull off the old ‘Baffle Trick’ on the Icelandic Alþing, if they could scare enough timid members, if there were any timid ones, or any that timid, in the summer session.
R.L.Dogh
27 Sep 16 at 1:25 am
There is a great deal of confusion on this matter.
It is very difficult to say, after the issuance of any currency, that holders who happen to be non domestic (i.e. foreign) effectively own a different asset class, that can’t be spent, can’t be reinvested in the full range of financial investments open to others, and can’t be subject to the normal interest rates applicable to others. That’s discrimination, and were every country who gets into trouble to do the same, the international trade and payments system would stop functioning. Iceland is in a good place today. It has been in a difficult place earlier and everyone understands it did then what it had to do. Today’s actions by the government is gratuitous discrimination for financial and political gain, without regard to its international obligations to a fair system of reciprocity to all investors, both foreign and domestic.
robert gibbins
15 Oct 16 at 9:42 pm
[…] Be Free” has now taken a new step: placing an ad in US, Danish and Icelandic media. As mentioned earlier, DCI Group, a political PR group based in Washington acts on behalf of the funds […]
International ad campaign and un-worried Icelanders at Sigrún Davíðsdóttir's Icelog
19 Oct 16 at 8:09 pm
[…] I’ve pointed out earlier the funds have allied with Institute for Liberty, mostly dormant since it fought the Obama care […]
Further to the Iceland Watch campaign at Sigrún Davíðsdóttir's Icelog
2 Nov 16 at 1:39 pm
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