Iceland’s Minister for Economic Affairs, Gylfi Magnuson says that restrictions on capital inflow to Iceland will be lifted next week. The move is an important precursor to lifting restrictions on capital outflow as well, he said.
The removal of capital controls has been stalled by the delay to loan payments from the IMF and Nordic countries; but with the deal now approved, the process is able to begin.
The removal of capital inflow controls will happen immediately, but the gradual removal of outflow curbs is dependent on central bank currency reserves, external economic conditions and the extent of new capital inflows, Magnusson told Reuters.
Capital controls were imposed following the collapse of Iceland’s banking sector last autumn and since then have been in place to limit the further devaluation of the Icelandic krona.
Should the Króna streight up again?
Why did Iceland have restrictions on capital INFLOWS? I can obviously understand and appreciate there being temporary restrictions on outflows, but why on inflows? Is that due to the government’s socialist policy?
They are just playing with words, so the international community think that the krona starts next week its prosses of floating, but off course they are not as stupid as we are, they know that there has never acctually been a inflow restriction, nobody will put a euro inside this country(exept Icelandres) untill the krona is floating. Thing they are doing is saying “on the 1st of novenber we start a prosses on refloating the krona by removing restrictions on capital inflow” WHAAT?? “yes, money can come in now, but not out” again WHATT?? who are you trying to decive here, a 6 year old?
JIM, ARE YOU STARTING TO REALIZE THE KIND OF COUNTRY ( OR PLANET) I LIVE IN? THIS IS ICELAND MY FRIEND… AND MORE TO COME. YOU ARE LUCKY OF NOT LIVING HERE… BECAUSE YOU WOULD JUST FREAK OUT!
THIS IS JUST A PUNCH OF CLOWNS, WHAT I CIRCUS.. ME AND THE INTERNATIONAL COMMUNITY HAVE BEEN LAUGHING SO MUCH AT THIS TRAGIC-COMEDY OF ICELAND… HAHAHA… THIS IS ALL SO FUNNY… AND YES I CAN´T WAIT FOR THE KRONA TO FLOAT… IT WILL GET AT LEAST 250 ISK FOR ONE EURO, AND THEN I WILL GO SHOPPING AL AROUND REYKJAVÍK… IT WILL BE MY “KING FOR A MONTH” ULTIMATE ICELANDIC EXPERIENCE… BUYING CLOTHES, EATING AT GREAT PLACES, HAVING MASSAGES, ALL PAID BY THIS COUNTRY’S SENSE OF SUPERIORITY AND IGNORANCE…
THANK YOU ICELAND!!
SIR EURO – I’ve been to Iceland many times and I like the country! I wasn’t running down the country, I was merely asking why it had restrictions on capital inflows. Apparently no-one knows…
Jim said:
“Why did Iceland have restrictions on capital INFLOWS”
Probably to control foreign investment, to ensure the best bits of the corpse of Iceland would fall into the Icelandic Elite laps, the foreign investment would always be welocme, as long as the Elite would get a slice of the pie, this is just a tool to make this easier, the previous gov was busy robbing Iceland of everything worth anything when they were overtrown, there was no attemt to do anything for the public,
Haarde appeared on tv to say we were doomed,
then they got busy stealing and covering all tracks
refuse everything, admit nothing, demand proof.
In my mind the reactions of the people in charge at the time indicated that they were not surprized by the crash, they were prepaired for this.
Axel, your post sounds actually very logic, I belive It’s acctually the first time I agree with you.
Now Regarding the “Relaxation” of the Krona, like I have said it before, its just a game of words that IMF has allawed Iceland to use, in other words they are cutting us some slack, lets not forget the the funtion of the IMF is not to help countries in need(like us) to get out of truble, the IMF function is to help its friends to collect their investments and money back when a country goes down the toilet(like ours), this review that took part last week is nothing but a scam both from IMF and our goverment, Iceland had to pay some insurence back this last week, and the money that IMF and the nordic countries released (168+670 USD something like that) will be used to pay that, so IMF is fulfilling its role with its friends and at the same time, they removed the problem with the international public opinion about linking the loan to icesave under UK/Dutch strong arm into the IMF, Icesave has not been accepted by Alþingi, and if it’s not accepted belive me no more money will be released to Iceland, the only people benfited from last week’s “review” were IMF and the collectors of that Insurense, so in other words IMF told the Icelandic goberment(and they agree to such a scam)We’ll release this money but it will go straight to pay this insurence(like must of the money they lend to a country,it goes only to pay creditors) you talk nice about us you can trash the UK if you want but not us, and you get to be in power a little longer in case you dont get the new icesave agreement accepted by the parlament, and you can also play arrownd with the news that you are starting recovery by relaxing the krona. what the IMF is doing now is called domesticating Iceland or trainning Iceland, showing us who’s the boss.
Where’s Mike the Nordic Analyst when you need him?! This is far, far beyond my understanding of macro-economics, but perhaps the capital inflow restrictions were an anti-inflationary measure…?
Does this mean that we depositors in – now creditors of – the collapsed Kaupthing, Singer and Friedlander bank in the Isle of Man will get our money back? It’s been a year. Some of the depositors don’t have many years left to enjoy their life’s savings – it’s about time Iceland did the honorable thing and returned the money.
Jim said: ” I was merely asking why it had restrictions on capital inflows. Apparently no-one knows…”
Probably for the same reasons a petulant 5 year old takes his ball home when in reality he really really wants to continue playing…
He said something about work commitments & confidentiality agreement preventing him from posting for a while.
Of course, that in itself is interesting.
No. This news in no way changes the likelyhood of K.hf attempting to honour the guarantee, nor does it increase the assets available within K.hf to meet that obligation (should they decide that it is one).
Iceland itself has nothing to do with the case, unless KSFIOM brings a case and succeeds in suing the FME for damages. Which seems unlikely to me, but IANAL.
I meant to say that the following news item is actually more relevant to you:
http://www.icenews.is/index.php/2009/11/02/kaupthing-to-take-stake-in-iceland%e2%80%99s-hagar-retail-empire/
You are one of the “Foreign creditors” referred to in the sentence, “Foreign creditors will most likely bear the brunt of the ensuing multi-billion krona losses.”
yes, does it mean that Iceland will do the honourable thing and pay back the unfortuante depositors of the isle of man , many deposited homes in this so called reputable bank and are now homeless.. please stand up to your responsibilities..
“Why did Iceland have restrictions on capital INFLOWS”
Ok, to make this simpler (and ignoring speculations on the rationale): Does Iceland’s currency regime actually apply any restrictions on capital inflows? I don’t think so, but maybe someone can quote/reference otherwise…
When a foreign person earns his Ph.D. degree in USA, it is statistically very common for him later to apply communist type of ruling policy in his home country. — Markarter Law
As I said, it’s not “Iceland’s” problem. And, whilst we are talking about hardship and suffering, on any scale that you choose to use the suffering and hardship in Iceland is going to eclipse that of the KSFIOM depositors.
Take your example of a homeowner who sold up and deposited their equity in the bank. They’re going to lose 10-30% of that equity (I’ve not seen the expected recovery from KSFIOM for a while, but I assume that it’s >70% but <100%). Whereas someone in Iceland who didn't sell up has likely not just lost 100% of their equity to a collapsing market but now owes far more on the mortgage because of indexation or currency fluctuations.
Now, you might say that that's their fault for exposing themselves to that risk, and you'd be correct. But likewise someone who put more than the amount guaranteed by the IoM government into an account.
After some sniffing around, it turns out that the lifting of restrictions on capital inflows is really about permitting certain outflows. Basically, if future capital inflows are registered, then their subsequent transfer out of Iceland will be authorised.
>Basically, if future capital inflows are registered, then their subsequent transfer out of Iceland will be authorised.
Madness! This should have been the case anyway. although perhaps there’s an angle/way to beat the system that I haven’t thought of that explains why they felt it was necessary to do this.
So, is there limit or restriction to transfer money to a bank account outside Iceland?
“Now, you might say that that’s their fault for exposing themselves to that risk, and you’d be correct. But likewise someone who put more than the amount guaranteed by the IoM government into an account.”
KSF is still operating as a nationalised bank, the supposed Icelandic promise to pay its debts don’t extend to the parental guarantee to KSFIoM. It took threats and leverage to get Iceland to honour Icesave, somthing IoM doesn’t have.
KSFIoM depositors were stupid on several levels though. Depositing more than the guaranteed amount, outside the EU and in an Icelandic bank that was within the most extended/fragile banking system in the world. It must have taken some effort to take that many risks at the same time.
Well, I have to say this is an interesting blog.
But which is the way out for Iceland? What do you icelandics think of this?
A worthless currency sure could be a disgrace for many many people, but somebody is making a jackpot there for sure.
From my point of view all rage coming from depositors from Isle of man, England and the netherlands, made a big big mistake , which is all unfortunate.
But, that was the risk they freely decided to take. Then why should iceland pay back for them. Major political earthquakes, currency default, credit default…sounds like Afganistan or Argentina back in 2001, has any of these countries ever been sanctioned or even summoned to pay?
The only way for iceland to go up again is to say I am deeply sorry, this will not happen again, but we cannot mortgage future generations because of a major force striked the country, that is nonesense.
That was a risk that they freely decided to take safe in the knowledge that there was a state guarantee of at least a minimum amount. A very different position from the one that you advance. It should be noted that the Icelandic state or its representatives had on numerous occasions before the collapse appeared to say that there was a state guarantee (although, when you look carefully at what was actualy said/written, it was equivocal).
The current legal reality is that there was in fact a state guarantee. Of course, that has not been tested in court, but every published legal opinion and EU/EEA/memberstate statement (ex. Iceland!) to date has supported that.
Not sure what your point is about defaulting. There’s nothing stopping Iceland from doing so, if it decides that the benefits outweigh the costs.
“So, is there limit or restriction to transfer money to a bank account outside Iceland?”
Yes, that’s the main point of the current currency restrictions on outflows.
Bromley86, the costs are already there, just this blog is because of it.
THere has never been been a crash since WW2 in the west as the one from Iceland (i do not consider west, Latvia or Lettland.
I consider that what happened to ICeland could be something that could happen in bigger economy: spain, for instance.
I am interested in the perception nationals have about their defaulted countries.
I’ve seen and studied many defaulted countries, and there is not one single similarity or paralell to one another. Maybe, going back to history you could find one, but really, all brand new defauled looks different.
Now, little or big country, tell me how you make default, and I’ll tell you of what are you (nationals) made of.
Bottomline, Iceland has one of the best chances to become a really prime economy, with enourmus success in the short run.
But this is only by assuming that there is no chance to pay back the money. Guarantees can be drafted, and even tested in court, but history have enough evidence that these kind of post mortem guarantees aren’t paid.
But, but, there is one thing Iceland could do to somehow, which is to share the wealth will (sure it will) generate from its own recovery, and his is by giving to every creditor, a kind of sovereign bong that could deliver a coupon after 3 years 0 interest, and that for the next 7 years (10 in total) will deliver interest and at the end of those 10 years will payd capital. But this, should be tight to a kind of national resource industry, state owned. Geothermal energy companies should be the ones more interested. As the state of iceland should grant them the same amount of money they decide to take under responsability to it back to victims of Iceland 2008 crash.
This should work.
“THere has never been been a crash since WW2 in the west as the one from Iceland”
Bull****! Unemployment in Iceland is much lower many European countries (eg it is roughly half that of Spain). Average income, living standards, education standards, health care, etc, etc are all still amongst the highest in Europe. Icelanders are not badly off relative to other Europeans!
Some thougts on the kreppa (icelandic crash)
Before I started posting on this site (about one year ago) I could not believe that Iceland would be hit so hard.
After all, it seemed to be a country that had everything going for it:
-no overpopulation
-no social tensions
-a small but educated population
-a tolerant and modern society
-a highly developed economy
-practically free energy.
As you can see my ideas were a bit naive. Posting on this site, reading comments of others as well as reading other stuff on the internet canged my opinion about several of these things (especially about education, the political system and the economy).
Now at first sight it might look as if Icelanders are still well off, especially if you compare the first impression with a country like Lithuania where the scars of the communist past are still visible.
But the reality of most icelanders, I think , is much less rosy.
The fall of the krona has more or less halved purchasing power. And those who had loans in foreign currency (a lot of people I think), saw there debt grow enormously.
An income cut in halves and doubled debts: a grim reality.
The fact that the Icelandic economy will be crippled in the years to come by the repayment of Icesave and other debts does not help too.