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July 2, 2014

Iceland has more water per capita than any other country on earth. Funk reports that there are 142 million gallons of annual runoff for each of its 300,000 residents, roughly six times more than water-rich Canada, fifty times more than the United States, two hundred fifty times more than China, and twenty five thousand times more than the United Arab Emirates. That is a lot of hydrogen and oxygen that falls into the salty sea, liquid gold in the eyes of farmers in California’s Imperial Valley and thirsty residents of cities in our American southwest.
Warmer at its northerly latitude than most think due to the influence of the Gulf Stream that warms Western Europe – the birthplace (though some say Greenland) of Leif Eriksson, who was in North America centuries before Columbus – Iceland also has the distinction of having both recently defaulted on its debt and nationalizing its banks (whereas here we victims of Wall Street banks bail them out).
I have written several times on the Icelandic experience. Icelandic banks (much like ours) went bust out of worship of paper wealth; the International Monetary Fund (not the Icelandic people) stepped in with a bailout, and their government collapsed. Here we rescued the banks, narrowly averting a major depression, and instead of letting the banks’ shareholders take the hit, we very generously not only bailed out their banks but bailed out their shareholders and even the banks’ insurers as well.
I think in retrospect that we should have let the banks go bust and sort out their situation in bankruptcy court while enlisting the aid of the Fed to keep the economy functioning during the interim. It was also an excellent opportunity to “break up the big banks” and their hammerlock on our economy, but we muffed it. We are now worshipping paper wealth more than ever. The big banks are back to their old tricks, bribery in China, losing billions selling derivatives in London etc. Next to Iraq, the bailout of the big banks and everyone associated with them was Bush’s biggest mistake, and his mistakes were legion, still keenly felt by the rest of us who continue to suffer from decisions made in his eight years in office.
Even after such a wrenching experience with greedy bankers and paper wealth, people in Iceland seem to still be in the capitalistic spirit of things. Their politicians want to sell their water and talk of the investment and employment such a venture would bring to Iceland. As with any such new frontier-like activity, the charlatans and con men show up first (Wyatt Earp went to Nome, Alaska, during its halcyon gold rush days), and so it has been to date in Iceland.
However, even though there are con men looking for big bucks on the quick, their rationale if not their motive for initiating such businesses is accurate. In a report co-written by a billionaire hedge fund operator who is not a con man, a Canadian named Eric Sprott, he noted in a burst of honesty that he was passing on such water investments because government gets involved and “don’t allow companies to raise prices exorbitantly,” while his co-author, Bambrough, noted that under such circumstances “It is hard to make outsized returns.” The report also contains the following observation by Sprott and his co-author, Kevin Bambrough: “Harsher summers and intense winters are in the offing, and they generally cause agriculture yields to drop sharply. Rising sea levels that intrude into aquifers and lead to hotter summers also sap water resources. Mankind is staring starkly at the possibility of a severe crisis in water and food supply.” Add that to the comment of the mayor of Rif, a small village in Iceland which contains gushing waterfalls and a good harbor, which would benefit from water export: “I think the next war in the world is about water, because, you know, you need water if you want to live.” I will expand on my ecological concerns and our upcoming population and water crunches in Part III. Stay tuned. GERALD E


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