According to this morning’s NY Times, “Iceland’s Leader Vetoes Bill to Repay 2 Lenders“ $5 billion owed to the British and Dutch governments.

Iceland, a nation of around 320,000 people as of 1/1/09, played fast and loose by borrowing low and lending higher (known as the “carry trade”) until it, like most American mortgage lenders, got hit with the sledgehammer of its borrowers inability to pay Iceland back.

Speaking of sledgehammers, should a private citizen attempt to back out of paying their local bookie or loan shark, a few burly types would be dispatched to coax payment from the reluctant debtor.

In this case, the equivalent of breaking bones might be an embargo of foodstuffs, or credit, or even withholding military assistance should Putin and his thugs decide that they’d like a bit more control of the waterways connecting northwest Russia with Europe and the North Atlantic, waterways that Iceland sits smack dab in the middle of.

Then again, the Western powers probably wouldn’t appreciate that unintended consequence of spanking Iceland.  We’re already stretched thin in Iraq, Afghanistan, and Pakistan, while desperately trying to prevent Israel and Iran from precipitating WWIII.

So the British and the Dutch, neither of which is in fine economic form themselves, will continue to attempt to squeeze water from a stone, or, in this case, a block of ice.  My guess is that, for appearances sake, their methods will remain civilized, although if they had their druthers, they’d probably opt for a little street justice.

Extrapolating a bit, I wonder how many of those Brooks Brothers Bozos would have taken the irresponsible risks they took if they knew that the result would be an old school back alley beat-down instead of a government bailout?

                          

For 5 billion dollars we could have endeared ourselves to a small but strategically located country, a country that has geothermal technology that makes it less dependent on foreign oil than any other western nation.

But we can’t help right now. Not because we can’t print up another 5 billion, but because politically we can’t appear to be helping others when we’re in such dire straits ourselves.

So we can’t think or act long term. We can’t make friends and influence people. We can’t, for a very small price, get an edge in the world of geothermal energy.

But the Russians can, and just did.