The real exchange rate of the Icelandic krona continues to increase and has strengthened for the seventh month in a row. The exchange rate index now stands at 75 points and has strengthened by 10 percent this year so far.
However, Thorvaldur Gylfason, professor of economics, says that the figures paint an inaccurate picture, according to RUV. He says the strengthening is entirely down to Iceland’s continued currency exchange restrictions and is not a real strengthening of the currency at all.
He adds that although inconvenient, the currency controls will probably have to remain in place for a long time to come. If the restrictions were lifted tomorrow, the krona would sink like a stone, Gylfason says.
[…] as the “carry trade”. The Monetary Policy Committee, the “MPC”, installed modified currency exchange controls on various investment securities to prevent a wholesale diminution of the krona from […]
If you guys could collapse the value of your krona, it would be much appreciated. I plan on visiting (to help your economy, of course) in October, and anything that could make the visit cheaper would be greatly appreciated.
“As you know Peter London I have never vote for the Independence Party”
Haha, sure you haven’t. You just love them from afar, right?
>who introduced them and was responsible for them being introduced
The Independence Party/ Social Democrat coalition government did introduice them as temporary at condition from IMF.
But it was in April 2009 that current Social Democrat – Left Green Party coalition government ( ie. Red- Green) did come in and make them permanent, and make them * more * strict.
Idiots, as Jón Danielsson does say in post I link to above ( but in more considered langauge ).
As you know Peter London I have never vote for the Independence Party ( although would not be embarrased to do so ).
Last time I voted for the traitor to his voters and supporters, Steingrímur J.
Fisy
“— thank useless hand sitting Red-Green colaition govenrment for that.”
Remind us, who introduced them and was responsible for them being introduced? it was you party was it, the IP?
Think we may have a new Godwin’s law — that of comparisons of some country to Zimbabwe in discussion of economics.
>Iceland if the European equivalent of Zimbabwe in Africa,
No if, of course it’s got nothing common with Zimbabwe in Africa, or Zimbabwe in any other place.
There is nowhere like Zimbabwe except really the German Wiemar Republic during 1920s.
Cant disagree with you that it long time ago that should have dismantled currency controls here in Iceland — thank useless hand sitting Red-Green colaition govenrment for that.
Iceland if the European equivalent of Zimbabwe in Africa,
what goes in never comes out (Dollars and Euros or Zeros).
What a Banana Republic full of Fat Cats.
@Burt,
I guess your post is ironic…otherwise it shows a lot of missunderstanding.
Indeed it is impressive to see how the US came to the rescue of the icelandic economy in 2008….or how it was prepared to speak up against the UK/NL on behalf of Iceland.
http://file.wikileaks.org/file/us-watson1-2010.txt
followed shortly thereafter by the appointment of a new U.S. ambassador who has a PhD in economics.
Is there a US ambassador yet?
http://iceland.usembassy.gov/ambassador.html
Not sure what you mean by the Krona being guaranteed. AFAIK the US has offered no support. Indeed, the only change on the 2008 situation is that the Chinese have become involved.
interesting comments. There are a few points to be noted. The Icelandic govt is in a pickle. The GOV’T (not the people) is negotiating on a payback to the Dutch and British. Ignoring the argument [for one moment] as to whether the Dutch/British should have stepped into the fray BEFORE the crash, the viability of the krona is dependent on a few things, namely exports of hard goods, debt to GDP ratio (moving target but unmanageable at present), exchange rates and ability to float the currency, to name a few. If the Dutch/British make additional loans and EU admission dependent on the payback, this is nothing more than good old Mafia “protection.” i.e. “paying for protection.”
Of course, the Dutch and British MAY ask for the same deals as given the Canadians regarding access to energy, industry etc. Those negotiations I am not privy to.
It should be noted that the U.S. is not disinterested in these matters. There was a “conference” in Jan 2010 between Iceland and the U.S. at a high level about the economic/currency/bank problems followed shortly thereafter by the appointment of a new U.S. ambassador who has a PhD in economics. AS A RESULT, the krona is guaranteed for LIFE!!!!
@Peter,
Yes there can be snow storm in summer, but mostly in the interior where there is little influence of the warm current in the Atlantic Ocean.
And even in a good summer Iceland is not a very sunny place. Temperature was between 15 and 20 degrees and sometimes it was cloudy and some rain fell.
But all in all it was not that bad and the weather on average was some 5 degrees colder than in the Netherlands.
This is not much if you consider the different location of both countries.
I have been camping myself in really cold weather (in Denmark in october and november) and it was not that bad (only getting out of your sleeping bag in the morning was not pleasant). This was during my army service when I Had to take part in an internaional exercise of NATO troops :-)
“I read somewhere that june 2010 has been the warmest month in Iceland since 1845.”
Wouldn’t the weather be the biggest issue with camping? I heard of snowstorms, even in summer.
And here is type of article that Þorvaldur Gylfason should right if he to be taken seriously when he does make assertions :
http://www.jondan.org/2010/06/a-whiff-of-bananas/
( This about the ISK linked to Foreign Currency loans. )
In basic, Þorvaldur is there with Paul Krugman in getting a minority of things right but getting more wrong in an misleading way as Jón Danielsson has point out :
http://www.jondan.org/2010/07/mr-krugmans-icelland-analysis-deserves-a-f/
Floating the currency as soon as can be done ( bond holders paid ) is the best way. This currency controls and lack of action by Red-Green government to clean up problem in banking system and loans is why we still have them.
As Jón does sum up (and better than I have since April 2009 when the controls should have been started to lifted but instead was made * more strict *) about the controls :
>” This is not the kind of capital controls that often can be a sensible policy. These capital controls were imposed only to lock in carry traders, and by most accounts are causing considerable damage. For reasons of equality (because of EU and IMF), no distinction is made between inflows and outflows and the impact of the capital controls is to prevent FDI and discourage domestic investment. “
As Þorvaldur Gylfason does say in one his articles, small and closed to the world is not an option for Iceland ( and the other states with small populations ). But that does not automatically lead to EU member state for Iceland people — his The Solution ( tm ) .
” If the restrictions were lifted tomorrow, the krona would sink like a stone, Gylfason says. ”
He entitled to his opinion but why should we take this sound bite as true without explanation?
He was dead wrong about the rejection of the IceSave bill in the referendum causing the end of the world as we know it, and he’s also dead wrong in his rhetoric about Iceland must join the EU.
( What it needs to do is stay in EFTA so it can trade freely with other country out side EU without EU commission deciding every thing as it does inside EU customd union. )
So he had better explain better why he thinks it will drop like stone.
Reality is that in fact many other currencies are getting weaker them selves as much as any thing else. This perversely does help Icelandic Krona even though as we know it is not a true floating currency at since late 2008.
The main things that face Iceland and can have effect of causing the mini shocks over next year ..
1. It looks like the Iceland government bonds and central bank loan due in 2011 are going to be paid. From loans unfortunatly but looks like it will be done. If cant be paid that is big problem for the ISK.
2. Other thing that need to be unwound is issue of loans in ISK but indexed to the foreign currencies — enough people have ti that whatever is done either harms peopel that took them ( as so far although they did decide to take them+ ) or trouble for the banks. This is being done since the indexing in this way was ruled unlawful.
But this is about strength of the banks and less about strength of the Krona ( as the two are not now linked in the same way as they were before 2008 crash ).
Unfortunatrly as usual Red-Green coalition is not prepared and has no clue what to do to make equitiable solution.
+In this I am with Brumley and Niels about the personal responsibility :
https://www.icenews.is/index.php/2010/06/19/foreign-currency-car-loans-confirmed-as-illegal-in-iceland/#comment-189375
3. The case of bond holders from emergency law getting claims below depositors. This is case in Reykjavík Distrct court now and will have a lot of impact on payability of IceSave debts from Landsbanki assets being liquidated ( indirectly ).
Thx Fisy,
I would like to add that Icelandair offers promotions on its english/dutch sites, giving you the possibility to visit Reykjavik for a few days.
If you check carefully you can find a good deal. We did so in nov 2008 (staying at hotel Loftleidir which is a good place) and it was not more expensive than a similar trip to, say, Rome.
During our trip to Iceland we gave a ride to a french hitch hiker who had a very cheap holiday. All he had bought was a retour ticket from the airline. He was hitch hiking and camping in nature and bought all his food in the local super market.
He got around the whole country (both tourists and icelanders are quite willing to give people a ride) almost for free, even visiting some very remote parts (westfjords, Asbyrgi). And since iceland has a ow crime rate camping in the open is quite safe. The only risk is getting lost in a very empty part of the country.
I would also like to say that icelandic people in general were really quite nice and helpful, no complaints at all.
Weather was fine too. I read somewhere that june 2010 has been the warmest month in Iceland since 1845.
Niels did write :
>” One nice thing about Iceland: the natural attractions (geysir included) are FREE to visit.
> AllinAll I must say that Iceland is a great place to visit and we liked it a lot. ”
I am glad to hear that you and your wife had a pleasant time.
( And Congratulations on your national team’s World Cup performance so far. )
Hi Terry,
Thx, we had a very nice time.
Indeed Iceland still is not a budget destination. In fact, it was considerably more expensive than during our first visit in november 2008. I think prices in krona have been hiked up (making things difficult for icelanders whose salaries have not increased) and also taxes have been raised making for instance fuel more expensive.
We drove 3700 km so that was not a cheapie.
Also we noticed tha some of the very popular attractions, like the Blue Lagoon and the Whale Watching from Husavik, quote prices in euro and want to be paid in euro.
So far for the krona doing well.
BTW about the statistic you showed, it is interesting but there are ways to make your stay in Iceland cheaper. For instance, eating out (and especially drinking alcohol) makes things very expensive.
However if you look carefully, there are also restaurants which are affordable, sometimes even surprisingly so.
Drinking can best be done in your hotel room (make sure to take some booze with you or buy taxfree upon arrival at Keflavik airport).
Also most filling stations have a grill where you can eat a cheap burger.
One nice thing about Iceland: the natural attractions (geysir included) are FREE to visit.
AllinAll I must say that Iceland is a great place to visit and we liked it a lot.
About football: it is absolutely crazy here. I live next to a canal and after the match against Brazil lots of people dived into the water (made a lot of fun pics). After the match against Uruguay yesterday claxoning cars drove around all night and there was also a lot of firework (sorry for offtopic) !
Real exchange rate: more than 300 per Euro on last months and, more than 250 per Euro on last weeks.
Currency controls will have to remain in place for a long time.
Hi Easy and Niels,
The article headline is not intended to be misleading. The króna “appears” to be doing well, looking only at the numbers and no digging deeper. That is why the headline was not “Krona doing well”.
Also, the “real exchange rate” is a technical term also known as RER, see: http://en.wikipedia.org/wiki/Exchange_rate (it is called gengisvísitala in Icelandic).
Hope this helps and thanks for reading IceNews
Alex, editor
Hello Niels
I recall you having recently been to Iceland. I hope you enjoyed your time.
Whatever the Krona rate – it still seems a pretty expensive place to visit from here.
http://www.dailymail.co.uk/travel/article-1290481/Holidays-Cyprus-Turkey-cheaper-staying-UK.html
I’m not into football – but good luck tonight!
A bit missleading?? Totally and completly missleading, not only because of the restrictions, but because the article itself says how bad the krona is doing!!!
I guess this is just part of the call for the media to publish more possitive news to lift peoples spirits. By the way “the real exchanfe rate of the krona”, according to who??
I think the title of this thread is a bit missleading because without the currency restrictions, indeed, the krona would lose most of its value.