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Today, Icelanders will vote on whether 320,000 citizens should repay 340,00 British and Dutch depositors. The total amounts to roughly $6000.00 per. The terms are 3.3% for 30 years. In a moment of Zen, the EU will "begin" the process of Iceland's membership in June. Iceland applied for membership in 2009 when the financial system crumbled.

The amount of monetary pornography that has spread around the world since Iceland vaporized is beyond comprehension. The US situation merely enforces our credit cycle view that the big names go at the end. Precious metals and commodities reflect the extent to which governments are working to bolster the fiat mirage. The path forward must focus on default, reschedule and recognized loss. We have argued for some time that a major borrower somewhere should invoke the Delta House defense: "You fucked up, you trusted us." Instead, thousands of hours of productive capacity and modeling (models that did not see or protect from the collapse) are being wasted on devising schemes to forestall the obvious and the inevitable.

The disgrace is the hubris that government agents are operating under. Despite market prices that verify their incompetence, they soldier on. The age of the Special Drawing Right (SDR) may be dawning. Created in 1969 by the IMF, SDRs are based on Euros, Yen, BPs and Bucks. Special allocations of late have boosted the amount of Rights in the system. We expect to hear much more on this subject in the days and weeks ahead.

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