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of Ms. Tina James

http://www.cnbc.com/id/27719011

First, to be fair, let’s look at the figures from other countries:

The British Government has used GBP 600bn to bail out the banks so far, France: EUR 360bn, Germany: EUR 500bn and in the US, taxpayer support is around $7 trillion. Latvia has just received Eur 7.5bn from the IMF.

UBS and Credit Suisse have a balance sheet of $3 trillion which is about ten times Switzerland’s GDP of $300 billion so Credit Suisse was levered by more than 40 times; UBS was levered by more than 64 times. A 16% fall in UBS’s assets would wipe out not only all of its equity but 100% of Swiss GDP on top.

According to Bloomberg, the total is about $10 trillion and it’s probably going to increase.

ICELAND’s bankers and population all played along with the easy and cheap global credit situation, at the time, in keeping with prevailing practices of all of the countries above. There is nothing very different in what Iceland did, to what happened elsewhere.

The problem was that Iceland believed that it was “in with the big boys” and, right to the last moment, stubbornly failed to see that the party was coming to an end. Instead of deleveraging, they racked up the leverage. Instead of realising that the housing bubble must burst in Iceland, just as it was bursting elsewhere, they kept building more new property developments. To put it simply, their equity was just not strong enough and their loan books were too weak. Bjarni mentions the figure of “only” Eur 20bn in Iceland. It doesn’t take a genius to see that a small drop in the loan book could easily wipe out a bank whose equity is 1/10th.

But the bubble is popping folks. Everywhere, not just in Iceland. And the Chinese do not want to lend more. Zhou Xiaochuan, governor of the Chinese
central bank said to Hank Paulson just recently:

“over-consumption and a high reliance on credit is the cause of the US financial crisis” and “as the largest and most important economy in the world, the US should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits.”

HMMMM, IT SEEMS THAT ICELANDERS ARE JUST ABOUT OF ASKING FOR MORE MONEY…. WHO IS GOING TO LEND THIS TIME?? CHINA??

Link social values with economical performance is something economists do on a daily basis. Of course we cannot “judge” every individual of a society as if they were just one body. But, in everything related to national economical performance each country comes out as a single unity.

If you would ever lived in Germany for enough time you would see how Germans in general are very cautious with what they do with their moneys. People use to save a lot and they live very much to the real levels they can afford. Why? After the II World War it was not easy to live in Germany and people learnt to live with shortages of food and anything else for many years. Therefore people learnt to be cautious with money, work hard and not to get into debt if it was not really necessary. Those values are still very much the values of the German society in general. They are to be observed in the way people live and/or the banks and the Estate act. I would say that even if Germany has been a country where you could live cheaper and relatively less than in Iceland during the last years, german society seem to live more on a realistic way in accordance with peoples possibilities. Swiss population is very similar to the german in the way that we are known for being cautious and preferably conservative ( in the way of low risk) oriented. Economical growth, both in Germany and Switzerland has been build on a strong basis during long term economical and social approaches.

Icelandic society has presented itself to the world, specially during the last years, as the triumph of the economical growth. But, what was the ground, the basement of that growth? Was is stabile enough? Was it build on a strong ground? What was the level of risk this society took? How did icelandic population get cautious and ready for any bad times to come?

Now this country will face disparity, loss and ruin. People will learn to live under other values. Society will be different so will hopefully the economy in the future. Last minute fixing solutions and measures are not going to work to put things as they were in a short time (1 or 2 years) We all know that it will take much longer.

The Icelandic crisis is something that needed to happen. It just got to happen in the worst time for doing so, which is at the beginning of a world wide economic “recession” ?

Well, of course German bankers were as foolish as the rest of the world, but it’s still a fact that the idiotic deregulation in the US pathed the way for the crazy financial “products” whose risks became undterminable even for experts. Just remember, it wasn’t a German agency who rated those crappy papers AAA! Not to defend the lamers in our banks, but the ratings by Moody, S&P et al used to be accurate. Just five years ago, nobody would have believed those agency could be so utterly, sytematically, constantly wrong.

“Knowless, Merkel was speaking about the US being the reason for the general banking crisis in Europe, not about the Iceland speicific bank collapse, which comes form a different cause.”

——————-

Of course Merkel is not referring to Iceland in particular, however it is in Europe and operating heavily in Europe.
She said the US was to blame 100% of Europe’s economic woes. The German banks were blameless in her opinion.

Who else can be responsible for the banking blunders of Leipzig bank, the state bank KfW and the HRE Mortgage €50bn bailout but Germany?
Merkel and the German Gov have persisted with blaming the US, long after German Banking shortcomings were blatantly obvious.

The obvious point I made was that Governments play the blame game as part of their first nature and some people buy into it.

And it isn’t really surprising she doesn’t mention Iceland in that speech, since it was held on September 25th, even before Glitnir crashed.
However, there is a suspicous silence in Berlin about the Iceland crisis. If you find a statement by Merkel covering the issue, pls let me know. I haven’t found one so far.

Btw, this story I found on the intertubes shows how the risks for Iceland were evaluated half a year ago:
“The suspicion is that speculators exerted undue pressure on the illiquid CDS market in the knowledge that the wider the spread went, the more fear of a banking collapse would contaminate the stock and currency markets. There are also concerns about the way rumours were spread about the alleged reliance of Iceland’s banks on internet deposits, which triggered reports in UK newspapers that such deposits could be withdrawn rapidly [sic!].”
“However, banking sector assets have grown from about 96 per cent of GDP in 2000 to about 10 times today – the main source of concern about the country.”
“But growth has not been without its costs. Iceland reported a current account deficit of 16 per cent of GDP in 2007, while inflation stood at 8.7 per cent in March – well over its central bank’s target of 2.5 per cent.”
“As for the banks, they have responded to criticism by diversifying funding away from wholesale markets and relying more on deposits [sic!].”
http://www.indybay.org/newsitems/2008/04/12/18492320.php

Pls note that Haarde stated he is “prepared to intervene in the markets”, and that several proposals on strengthening Iceland’s position are mentioned, including joining the Euro. What happened in the six months until the shit finally hit the fan, did he fall asleep at the wheel? It’s scandalous.