Blogs > Cliopatria > ICELAND: EU GAIN IS U.S. LOSS

Jul 16, 2009 3:49 pm


Barack Obama may be an international celebrity but his so called popularity has failed to improve the economic or strategic position of the country over which he presides. The opposite is true. Barack Obama's America is no longer a leader but a follower and I am not speaking merely about rising Asia but also about rising Europe. Nothing demonstrates the new balance better than Iceland's decision to begin negotiations on joining the EU. For when faced with the choice between the dollar of the Euro, Icelanders opted for the Euro despite the fact that doing so meant not only the loss of long cherished independence but the endangerment of its all important fishing industry.

It is true that unlike her predecessor (who preferred the dollarz) the current leftist prime minister is an EU enthusiast. Still, the parliamentary vote followed a Gallup poll showing that 61.2 percent support EU negotiations and only 29.6% oppose it. Why? because the dollar cannot be trusted. An Icelander explains:

. . . Iceland could always adopt the dollar, no problem (but without resort to US Treasury as lender-of-last resort). No need to ask for permission. Panama uses the dollar, and Ecuador too (starting in 2000), and some countries have more or less dollar-pegged currencies – Barbados, Argentina, Belize. The dollar solved Ecuador’s hyper-inflation problem for a while but now it is thinking of giving up on the dollar because it has defaulted on its sovereign bonds.

The danger of course is that the dollar is going to lose even more of its value now the the US has been issuing money out of thin air to pay for the bank and credit problems.

I suppose you could officially adopt the dollar and as soon as the government and banks get them, change them into Canadian dollars or Japanese yen, or hedge in some other way against a falling dollar.

Who cares about Iceland? Anyone who can read a map. That included FDR who in a July 7, 1941 message to Congress, called the island a"strategic outpost" in the Atlantic crucial for"defense frontier" of the New World. Iceland is amongst the founding members of NATO. Still, a paper published by the Friedrich-Naumann Foundation, affiliated with the German Free Democratic Party calls Iceland, a Bridgehead to the Arctic reflects the competitive nature of current German (and I suspect European) thinking. Subtitles include: Dollar or Euro, Great Game, EU Rather Than USA and Special Relationship. It emphasizes the need for Germany to do its utmost to encourage Iceland to join the EU because

Above all, Iceland would be a"strategic bridgehead to the Arctic realm, which is growing in significance for the EU" the advisors explain. Because the icecap is receding, due to climate change, the North Pole's voluminous amounts of mineral deposits could be profitably exploited over the next few decades, and new maritime trade routes opened through the Arctic Ocean. ( reported.[5]) Observers see the possibility"of a new 'Great Game' developing in the Arctic."[6]"That kind of geopolitical competition could lead to a progressive militarization of the Arctic."

Indeed, EU officials could not be more delighted :

"The decision of the Icelandic parliament is a sign of the vitality of the European project and indicative of the hope that Europe represents," EU commission chief Jose Manuel Barroso said in a statement.

Barroso is right to crow, for as important as Iceland is, it's decision is far from an anomaly. Rising Asia used to look at Europe as nothing but a museum. I suspect Europe's superior performance during the recent economic crisis not to mention the Obama administration's efforts to remake America in Europe's image cannot but lead to a major rethink. For there is no denying but that in the past six months America is viewed as weaker and poorer and relying on America or its currency no longer seems wise. The great game continues and the balance may shift again. In the meantime, the US lost another important"strategic outpost."

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HNN - 7/17/2009

You are right that it is not ONLY Obama's fault but he has accelerated the spending geometrically. You have not heard about Chinese concerns before he became president. To be honest, I have nothing against the value of dollar going down (it will hurt me too) so that US manufacturing could compete. Obama has created such a terrible business atmosphere in the country that no one is daring to invest. I am also against throwing money to the wind especially as it is done in such a useless way that it increases instead of decreasing it. In contrast to the past, the US has higher unemployment than Europe! That is also Obama!

Olof Nordgren - 7/17/2009

Dear Judith,

I have an income in dollars so I am also suffering from a leaping dollar. But your point Mr Obama is the major explanation I can t agree. He is actually inhereting this position after years of over spending in US and a major increasing deficit in the budget. We all know it from long time ago. The only way is the bench marketing of the fastest growing economy in the world, China. This is what should be discussed, not who is responsible since you all are. What could be done and how? If you believe in a free market och free trade competition is a good thing allocating resources in the most efficient way and also welfare.

Best regards
Olof Nordgren