Iceland and the Law of Fraudulent Conveyance

As readers of this site may know, I am an keen observer of the ongoing drama in Iceland. What is going on in Iceland mirrors the drama in a good deal of Eastern Europe as well. There are people who would lead you to believe that the recently concluded G20 meeting in London achieved positive results for the world economy. If you believe what Dr Michael Hudson wrote in a recent article on the G20 and the IMF,nothing could be further from the truth. G20 nations offered to contribute about one Trillion in funds to the IMF to loan to these strapped emerging nations who are already loaned out and cash strapped. Dr Hudson, if I understand his conclusions, has said that these loans if they are accepted will just prolong the debt agony of these countries and have the true surreptitious purpose of returning these loans to the European banks that foolishly and perhaps fraudulently loaned them money in the first place, in effect a giveback to the banks by imposing onerous conditions on the workers and economies of these struggling nations. This is a serious charge but the most interesting part of his article was his explanation of a law in the state of NY called the Law of Fraudulent Conveyance. This was a law passed before the American Revolution to deal with a predatory practice of British speculators at the time. These brit speculators would loan money to upstate farmers and then demand payment before the crops came in and obviously before the farmers could get paid for their harvest. These creditors could then foreclose on these farms. And so this law was passed establishing the legal precedent ” that if a creditor makes a loan without having a clear and reasonable understanding of how the debtor can repay the money in the normal course of doing business, the loan is deemed to be predatory and therefore null and void.” Whoa partner! If this principle were to applied to many of the Iceland or Eastern European loans, the lending banks could find themselves out of luck. But I’m not holding my breath. The IMF has the same stranglehold on emerging market countries that the US finance and Insurance executives have over the American people. The IMF must know that there is almost no way for these countries to pay off these loans in much the same way that money loaned to emerging African countries decades ago was paid off. I think one can make the case that these loans were predatory and deceptive and therefore null and void and should be defaulted upon. I would think that the strategy should be for these countries to approach the IMF as a group rather than letting the IMF pick them off individually with sanctions. Dr Hudson makes the statement that no country has ever paid off its national debt and the IMF is demanding repayment of these loans on the backs of the labor of its citizens and by trading sovereignty and valuable national resources for this debt. If Dr Hudson is correct, these countries should either demand terms that are fair to their citizens or walk away and say “Enough!”

About cal48koho

I was born in Montana and raised in a dozen Air Force SAC bases. I attended Holy Cross,West Point and UNC in Chapel Hill(MD"71). Army doc in the last years of the Viet Nam fiasco. My wife and I live in a log cabin I built in Jackson Hole in 1975 when we aren't on our Cal 48 yawl. I've done a dozen different jobs and retired from ER and Anesthesia in 2004. I've written magazine articles and am writing a Kunstleresque novel about life in a past Peak Oil world. We are living in a beautiful alpine setting where we hike and ski when we're not thinking about economics and spreading the implications of PO to anyone who will listen.
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