Last week, the markets soared when Merkel and Sarkozy announced a debt deal for Greece. This week, everything is back in the shitter because the president of Greece has called their bluff by putting the deal to a vote from the Greek public. Yves Smith at Naked Capitalism has posted a very good roundup of the situation featuring plenty of links to serious analysis and commentary.

The general feeling is that depending on how things go in Greece, Italy is likely to implode next, regardless of whether or not Silvio Berlusconi released his latest CD of love songs. The Economist’s Free Exchange blog has a short consideration of the likely scenarios.

Gabriel O’Malley’s “Letter From Dublin” in the latest N+1 magazine looks at the collapse last year of the long-standing Fianna Fail government in the wake of Ireland’s debt deal with the EU and the unlikely upswing in the country’s situation over the last year.

At VoxEU.org, Icelandic economics professor and member of that country’s new constitutional commission Thorvaldur Gylfason recently wrote about the political upheaval in Iceland and the groundbreaking move to scrap the entire political system and rewrite the constitution, while telling the EU and the IMF to shove it.

And one more Naked Capitalism link: Yves Smith on another global financial rebel, Argentina, which also walked away from the IMF’s punitive austerity plans, opted for government stimulus, and presently has a growth rate of 8%.

Poor Iceland was the canary in the coal mine as the world financial crisis began to erupt like a volcano, but as the attention of Europe has shifted toward Greece, Spain, and the other countries teetering on the edge of collapse, there hasn’t been much said about Iceland.

A journalist named Deena Stryker writes on her blog about the decisions made in Iceland to reject the harsh austerity and repayment program imposed by the IMF and European banks. The tiny country voted overwhelmingly in a national referendum to NOT saddle the citizens with the debts incurred by the reckless actions of the banks. Instead, they arrested the bankers, rewrote their entire constitution through open and non-partisan participation, and has even earned praise from the IMF itself for its economic recovery.

Greece, Spain, and even the United States ought to start rethinking making their citizens bear the brunt of the enormous crimes committed by the international financial system.

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The infographic above explains why the volcanic ash cloud spewing from Iceland might not be such a bad thing: grounding 2/3 of the air traffic in Europe also eliminates 2/3 of the daily amount of carbon dioxide released into the atmosphere from those jet engines, which is an enormous amount. Added up over the last few days, we’re already talking about well over a million tons already, with at least a couple more days of cancellations to go. Philosopher and writer Alain de Botton imagines a post-airline world in this thoughtful BBC essay.

An old friend from high school who lives in Stavanger, Norway posted this picture on Facebook showing the ash depositing on her patio. It reminds me of how we got some of the ash from Mount Saint Helens after the big 1980 eruption all the way in Maine. I don’t recall the same sort of issue with air travel back then, but maybe it’s because it was just a single big explosion instead of an ongoing eruption, so the cloud dissipated faster.

As usual, Alan Taylor at The Big Picture has rounded up the best of the newswire photos of the volcano so far. I particularly like this one because the molten lava peeking out from underneath its crust is so malevolent-looking:

And here’s an amusing little video of various BBC presenters and reporters trying to pronounce the name of the volcano, Eyjafjallajökull:

You have to give the Beeb credit for even trying. The local newsmonkeys have all opted to say “the volcano in Iceland”.

Like the proverbial canary in the coal mine, the nation of Iceland was one of the first places to be brought to its economic knees by the global recession last year. I posted about the situation just as our own stock market was free-falling last October and again back in March of this year (last item in the post).

Now, a year on, the Times of London looks at the events of the last twelve months in Iceland. Because the story ran in the “Women’s” section, there’s a somewhat odd slant of the story as it talks about the election of the current prime minister, Johanna Sigurdardottir, and the replacement of most of the cabinet ministers with women, but if you can get beyond the patronizing tone of that part of the article, it’s a good review.

Relatedly, The Nation has this article about the state of the Latvian economy, which also went tits-up last year and has been struggling quite badly since. Like Iceland, Latvia had been experiencing a boom through financial speculation, even as Latvia had been experiencing emigration of its labor force to the rest of Europe (Latvia joined the EU in 2004). Unlike Iceland, which has a very homogenous population and culture, Latvia has a very large Russian minority as a legacy of its forced inclusion in the Soviet Union, and political stability has been far less easily maintained than in placid, plodding Iceland.

A few links about the neverending clusterfuck we have gotten ourselves into economically:

Harvard professor and darling-of-the-right Niall Ferguson gave this interview to Vanity Fair, where he asserts that the United States really has no choice but to walk away from its colossal foreign debt, because the only other option is complete collapse. He makes a few other salient points along the way, most notably that China is also completely fucked because of us and can’t really do anything about it economically, but absolutely has the upper hand on any diplomatic disputes that might arise for a long, long time to come. Coincidentally, he’s plugging his new book The Ascent of Money, which he says he planned to have published just as the entire world economy fell into the shitter, since that’s a GREAT way to sell books.

But it looks like he’s not talking out of his ass on this. This article on a financial news website called Seeking Alpha offers pretty much the same conclusions as Ferguson’s, albeit in more technical financial jargon (via Polymeme). The whole damn country is about to miss its mortgage payment, and when that happens you’ll be using your 401(k) statements for toilet paper. So don’t go calling Cash4Gold.com just yet.

Meanwhile, I think a lot of people are still trying to pick their jaws up off the floor over the reports of $18 BILLION dollars being handed out to Wall Street executives using our precious “bailout” money. Not to mention the daily stream of stories about banks spending millions on stadium naming rights, the BofA CEO with the multimillion-dollar decorating bill, and other such rubbing-your-nose-in-it shenanigans. At The Seminal, contributor Chris Edelson did a little quick math to come up with some of the other things we could have done with that $18B besides piss it away on the bailout. For example, the S-CHIP bill, which was passed by both houses of Congress last week (and was vetoed TWICE by George Bush) will add $32 billion per year to a program that already costs $25 billion per year. The bailout bonus money could have paid for that increase for two years running without the increase in cigarette taxes which will be the funding mechanism.

Now, some regular visitors here don’t much like Vermont Senator Bernie Sanders, but I think he’s one of the best representatives any state in America could ask for. Like a lot of us, Bernie is simply PISSED OFF about the bailout and the flagrant contempt with which the Wall Street criminals are raping this country. Last week, Bernie sent a letter to Senate Majority Leader Harry “Gutless Wonder” Reid demanding that the Senate begin investigations into the disbursement and use of TARP funds. President Obama’s “salary cap” proposal is a first step, but a laughable one when you consider the scope of the fraud being committed, and nothing short of an investigating committee with a freshly-sharpened guillotine is going to have any real impact.

Regular readers know that I have posted a couple of times about the economic disaster as it has played out in Iceland, and you probably heard that the government there fell, as well as the story about the new prime minister being a lesbian (which, like Obama being black is all well and good but not particularly relevant at this moment in history). But next on the chopping block is Latvia, where rioting nearly brought down the government last week. The problems in Latvia are strikingly similar to those in Iceland, but a compounding issue for the Balkan country is that a third of the population is Russian, and they are agitating over what they call discrimination against them. That, in turn, could give Russia an excuse to cause trouble, if it so chose.

And while those two cold northern countries are struggling, so is the “Las Vegas of the Arab World”, Dubai. Unlike Iceland and Latvia, though, Dubai’s troubles all come from their overheated real estate speculation. This post at The Daily Clarity outlines the heart of the problem, which has manifested itself in the rapid departure of hundreds of ex-pat workers and businessmen who were fueling the Dubai land grabs. They point to this Times of London article about the recent phenomenon of luxury cars being abandoned at Dubai’s international airport by businessmen getting out while the getting is good. I’m actually a little surprised that American businessmen haven’t started pulling the same shit, but maybe they’re waiting for those bailout bonus checks to clear first.

Things have been pretty tough in Iceland since the start of the banking crisis back in the fall. The three largest banks in the country all were nationalized to keep them from going under. British Prime Minister Gordon Brown basically called the entire country a nation of frauds and froze a billion pounds of assets in Icelandic banks operating in the U.K. Unemployment has tripled (although it’s still only 4%), and there are persistent anecdotal reports (regularly denied by officials) that the citizens are hoarding food and other supplies out of fear that there will be a political collapse.

So maybe it’s time for the Icelanders to give up on their clean, wholesome, Scandinavian progressive way of living and return to a darker time, when Iceland was populated by Viking marauders, fierce warriors, and, of course, witches and sorcerers. The Museum of Icelandic Sorcery and Witchcraft remembers a time when the volcanic isle was home to practitioners of the black arts. Among their exhibits is this replica of a pair of “necropants”, made from the skin of some unfortunate human sacrifice to the underworld. And the whole place is overseen by a huge, terrifying raven:

A couple of Icelandic Viking raids on Scotland and skinning a couple of Labor MPs for necropants, and I’ll bet Gordon Brown would be singing a whole different tune about whose assets are whose.

Our most serious problems are waiting for us just around the bend as the meltdown of the banks and now the plunge of the stock market begin to make their presence felt in the “real” economy. But in some places, the proverbial shit has already hit the proverbial fan.

Despite borrowing from the Bush playbook in their recent scuffle with Georgia over South Ossetia, the Russians are mostly just a lot of hot air…at least according to this article by international relations scholar Murray Feshbach in yesterday’s Washington Post. Russia’s economy is almost completely reliant on selling oil, so they are just as badly impacted by the downturn in the world economy as everybody else (although they might be in a better position later on). Last week I had a link to a website from a Russian fellow who says that his country is better prepared to withstand the hardships of a global depression because Russians are more accustomed to doing without, but that’s a pretty back-assed way of looking at how bad things are going to be in a country that is only just emerging from two decades of internal turmoil. But it’s not just the economy, Feshbach says. The Russian military has completely fallen apart and won’t be rebuilt anytime soon given the suddne lack of funds. The most devastating thing, though, is the burgeoning health crisis in Russia. Russia is actually depopulating at a rate so high that it cannot recover from the loss of people. The average Russian male only lives to the age of 59, compared to 72 in most developed countries. Russians suffer from heart disease at three times the rate of Americans, they drink twice as much as the WHO considers safe, and tuberculosis is becoming a national epidemic, with crumbling medical infrastructure unable to handle the uptick in cases.

Iceland, on the other hand, is in deep doo-doo right NOW. Iceland’s economy has seen a huge boom in the last decade or so, mostly from playing the numbers game in the international credit markets. Oops. The third largest bank in the country failed last week, and the government doesn’t have enough money to bail them out. They seized the bank, but the seizure may take the government down with it. Contributing to the problem is that the national currency, the krona, has collapsed and is as worthless as the currency in Zimbabwe. Over the weekend, there were bank runs as people tried to salvage what they had, and there have been reports of people beginning to hoard food. Iceland has asked for emergency inclusion into the EU so that they can abandon their now-worthless currency and convert to the Euro, but with the EU looking at rough waters, too, they aren’t terribly inclined to bring in a country that’s already failing.

If you need a laugh after all that…go check out this very amusing “interview” by the Australian comedians Clarke & Dawe explaining why Australia is insulated from all this hullaballoo.