Comments on: Origins of the current economic downturn in Iceland

By: Ohne Schufa

Ohne Schufa — Mon, 01 Feb 2010 12:59:22 +0000

Iceland is a example for too big ambitions and too small background. What is not fine is that Iceland try to let other countries pay for it.

By: Kenya's interest rates are craaaaazy high===this puts it in perspective - Mashada Forums

Sat, 02 May 2009 22:19:26 +0000

[...] East | Lebanon ‘immune’ to financial crisis http://www.nytimes.com/2008/04/18/bu…18iceland.html Origins of the current economic downturn in Iceland | IceNews – Daily News [...]

By: TerryB

TerryB — Mon, 19 Jan 2009 03:31:37 +0000

An amazing story of gluttony, greed and pride – and the destruction of a nation. Living just outside New York city, I find myself troubled to think how much of this story matches what people like Bernard Madoff and the other Wall St. “genius” types did last October. Time will tell, but I have a sick feeling that this article is also a bit prophetic of things yet to come.

By: Axel

Axel — Sun, 18 Jan 2009 19:12:26 +0000

So, if this gets serious, can Iceland feed itself?

This is already serious, and im not sure it can
the government here belives that they can pay all those bn of $ by raising taxes on the 100k people who still have a job,
the government is now working on privatizing the remaning state ovned companies and institutions like healthcare so they are not focusing on anything else, this a golden opportunity for the Independance party, Ingibjörg Sólrún the foreign minister and head of the other government party samfylking is now having her brain opperated on for the second time in a few weeks beause of cancer
one could wonder if someone with brain cancer should lead the nation tru a crisis like this,
the person who takes her place when shes on the opperating table is Össur Skarphéðinsson
Geir Haarde walks over him with out even lifting his feet,

Vilhjalm Antonsen, Excellent analisys of the situation, thanks

By: Peter Ravenscroft

Peter Ravenscroft — Sun, 18 Jan 2009 14:50:25 +0000

Comment from Downunder, and a question.

A very interesting article.

Money backed by pink fluff (fiat money) is just a politician’s promise, seems to me. Banking and aluminium are on the rocks, globally. That leaves fishing.

So, if this gets serious, can Iceland feed itself?

(Typo corrected, apologies)

By: Peter Ravnscroft

Peter Ravnscroft — Sun, 18 Jan 2009 14:49:02 +0000

Comment from Downunder, and a question.

A very interesting article.

Money backed by pink fluff (fiat money) is just a politician’s promise, seems to me. Banking and aluminium are on the rocks, globally. That leaves fishing.

So, if this gets serious, can Iceland feed itself?

By: Niels

Niels — Mon, 12 Jan 2009 12:58:00 +0000

@Vilhjalm Antonsen
Thanks for your explanation, it is really illuminating. You are totally right that the icelandic government had no idea what to do when the crisis was coming and failed to make even the most elementary preparations.
Indeed icesave in the Netherlands was set up as a dutch bank, subsidiary to Landsbankki. BTW some more info on this: When icesave entered the dutch market dutch financial institutions (like I said) were very doubtful and imposed certain conditions. One of these conditions was that Icesave during the year 2008 was not supposed to attract more than 0,5 billion euro in capital. However, Icesave broke this agreement and by the start of the whole crisis, in october, already had attracted more than 3 times as much, some 1,6 billion euro.

I have read the wikipedia entry on the icesave dispute and what especially struck me was the tone of both Mr. Oddson (commenting at the beginning of the crisis) and Mr. Mathiesen in his conversation with mr. Darling. I can only describe this as a combination of arrogance and incompetence:
+++++++++++++++++++
Oddson:
That evening, one of the governors of the Central Bank of Iceland, former Prime Minister Davíð Oddsson, was interviewed on Icelandic public service broadcaster RÚV and stated that “we [the Icelandic State] do not intend to pay the debts of the banks that have been a little heedless”. He compared the government’s measures to the U.S. intervention at Washington Mutual, and suggested that foreign creditors would “unfortunately only get 5–10–15% of their claims”

crucial fragment from the conversation between Mathiesen and Darling:
Darling: Do I understand that you guarantee the deposits of Icelandic depositors?
Mathiesen: Yes, we guarantee the deposits in the banks and branches here in Iceland.
Darling: But not the branches outside Iceland?
Mathiesen: No, not outside of what was already in the letter that we sent.
Darling: But is that not in breach of the EEA Treaty?
Mathiesen: No, we don’t think so and think this is actually in line with what other countries have been doing over recent days.
++++++++++++++++++++

By: Vilhjalm Antonsen

Vilhjalm Antonsen — Mon, 12 Jan 2009 11:02:30 +0000

@Niels,
A good point. However, I believe the Icelandic government could established (even as late as last October) and Icelandic equivalent of the American FDIC, a separate insurance company backed by federal guarantees, which insures accounts up to $100,000 (it may now be $200,000). Thus most Icelanders would have preserved most of their accounts. Of course the British might have objected to this ploy as a method to evade paying for the Icesave accounts – but the advantage of such a move would be to leave most of the debts and assets of the banks in UK bankruptcy courts, where the foreign creditors (mainly the British and Germans) would fight over them. Credit swaps for the banks were trading for as little as 3 cents on the Euro in an auction last October. Why would this be? Perhaps because the bond holders involved in the credit swaps anticipated that the most logical course of action for the Icelandic government would be to let the bank assets be settled in bankruptcy courts, either in UK, Iceland, or Germany, and that assets would cover only a small portion of the debt, and that the remaining debt would not be assumed by the Icelandic government.
Similarly, the Icelandic government could also have guaranteed Icelandic mortgages (those not already backed by the government) up to a certain point, as is done in the US using the semi-independent insurance vehicles FNM and FRE.
The Icesave disaster could have been avoided if the Icelandic government had required the banks to set up Icesave as an subsidiary company, as I think was done in the case of the bank branches in Netherlands and perhaps Scandinavia.
At this time such speculations are of course useless. But the point is that the government had a variety of strategies that it could have pursued. These strategies would have been very complicated, involving bankruptcy courts in three or four countries, and negotiations with England and Germany and the EU. Whatever the Icelandic government had tried, the outcome could not possibly have turned out worse than the present situation, in which Iceland as a nation is liable for all the debt.

By: Nicki

Nicki — Mon, 12 Jan 2009 10:32:24 +0000

All this could have been avoided if the Icelandic banks and government would have looked for liquidity in the form of loans in countries like India or Germany, may be one or two years earlier, to be prepared for the worst. But the leading class in Iceland may have a tendency to live in a dream world and over estimate their abilities and expertise.
Because the Icelandic elite made too much money too easily, the common Icelanders following their corrupt elite and trusting them like sheep, allowing them to make unimaginable profits. The common Icelander being willing to pay inflated interest rates for houses and expensive consumer goods for years and paying artifically inflated prices on food for decades without a word of protest. This is unique. The greedy elite probably thought it is as easy to make money everywhere in the world but they were wrong about it. The real problem is not the people, the real problems are greed, arrogance and impulsive passion which culminates in weakness for sensual enjoyment, loss of mental strength and the inability to resist. As Oscar wilde once formulated:
“I can resist anything, except a temptation.”

By: Nicki

Nicki — Mon, 12 Jan 2009 10:24:01 +0000

All this could have been avoided if the Icelandic banks and government would have looked for liquidity in the form of loans in countries like India or Germany, may be one or two years earlier, to be prepared for the worst. But the leading class in Iceland may have a tendency to live in a dream world and over estimate their abilities and expertise.
Because the Icelandic made too much money too easily, the common Icelanders following their corrupt elite and trusting them like sheep, allowing them to make unimaginable profits. The common Icelander being willing to pay inflated interest rates for houses and expensive consumer goods for years and paying artifically inflated prices on food for decades without a word of protest. This is unique. The greedy elite probably thought it is as easy to make money everywhere in the world but they were wrong about it.