IMF:- Iceland ROCKS!

[Mega]

http://www.bloomberg.com/news/2012-0...s-nations.html

Well, well...........not very long ago they would have named Iceland a "Terror state".........now all of a sudden....Default = Cool !

So, default is now "Ok" ?..........are we expecting a few?
Mike

[jiimbergin]

Re: IMF:- Iceland ROCKS!

Thanks again Mike for a nice find. I missed this.

[bungee]

Re: IMF:- Iceland ROCKS!

Iceland's President Explains Why The World Needs To Rethink Its Addiction To Finance

http://www.businessinsider.com/olafu...-2012-4?page=1

[c1ue]

Re: IMF:- Iceland ROCKS!

To be fair, I do wonder what the creditor profile of these failed Iceland banks were.

Was it a literal handful of individuals? Were they foreigners?

Certainly the political reaction and subsequent government handling is something I think all of us in iTulip would like to see in Europe and the US, but the profile of the Icelandic bank creditors may well have been a large factor.

For one thing, these banks even if older, were only very recently 'big fish'. They simply hadn't had much time yet to worm their way into Iceland's government and upper echelons of power.

[photon555]

Re: IMF:- Iceland ROCKS!

I truly hope that we do not soon read about the tragic crash of the Icelandic President's plane with the loss of all on board. "Finance is an addiction?" Heresy!! Off with their heads!

[GRG55]

Re: IMF:- Iceland ROCKS!

To be fair, I do wonder what the creditor profile of these failed Iceland banks were.

Was it a literal handful of individuals? Were they foreigners?

Certainly the political reaction and subsequent government handling is something I think all of us in iTulip would like to see in Europe and the US, but the profile of the Icelandic bank creditors may well have been a large factor.

For one thing, these banks even if older, were only very recently 'big fish'. They simply hadn't had much time yet to worm their way into Iceland's government and upper echelons of power.

What Iceland did seems somewhat analogous to what Malaysia did during the 1990's "Asia Crisis", including the ongoing currency controls the authorities imposed. Much easier to manage this sort of thing in a small economy (compared to neighbours) with an existing high level of state participation and control...

From the article:

"...In Iceland, the krona’s 80 percent plunge against the euro offshore in 2008 helped turn a trade deficit into a surplus by the end of the same year. Unemployment, which jumped nine-fold between 2007 and 2010, eased to 4.8 percent in June from a peak of 9.3 percent two years ago..."

"...The island still needs to show it can unwind its capital controls successfully, Zakharova said. About $8 billion in offshore kronur are locked behind the restrictions. The central bank has said the plan to ease controls is likely to be completed by the end of 2015..."

"...“The lifting of the capital controls is a key challenge for Iceland and it’s not an easy task,” she said. At the same time, “the government has regained access to international capital markets; the cleaning up of the balance sheet of banks has been proceeding at good speed..."

[Polish_Silver]

Re: IMF:- Iceland ROCKS!

Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers

--Bloomberg.

I loved that part. Return implies Risk? Who knew?

As C1ue pointed out, the bondholders lacked political clout. Perhaps that is because the political system is just more functional, that is, harder to "buy".

I also wonder about the capital control unwinding. The massive devaluation has imposed losses Krona holders. That is "fair" if those were the greedy foreigners who bought Krona and artificially drove up the value in the first place. It is not fair if those Krona were saved by Icelanders doing honest work.

I have to think the US will face something similiar, though maybe less abrupt.

[GRG55]

Re: IMF:- Iceland ROCKS!

...I also wonder about the capital control unwinding. The massive devaluation has imposed losses Krona holders. That is "just" if those were the greedy foreigners who bought Krona and artificially drove up the value in the first place. It is not just if those Krona were saved by
Icelanders doing honest work...

That statement seems illogical. A falling krona exchange rate means everyone holding savings in that currency lost purchasing power, regardless of how "honestly" they came by their savings. Unless you survive on only fish and aluminum it's pretty hard to avoid having to pay for imports in Iceland, so said honest worker with savings got hosed just like those greedy foreigners.

You should go back and read the history of how Iceland's Central Bank aided and abetted the formation of the bubble, especially the overvalued krona before it finally popped. There's no lily white heroes in Iceland either.

"...Coming from a small domestic market, Iceland's banks have financed their expansion with loans on the interbank lending market and, more recently, by deposits from outside Iceland (which are also a form of external debt). Households also took on a large amount of debt, equivalent to 213% of disposable income, which led to inflation. This inflation was exacerbated by the practice of the Central Bank of Iceland issuing liquidity loans to banks on the basis of newly-issued, uncovered bonds – effectively, printing money on demand... the Icelandic money supply (M3) grew 56.5% in the twelve months to September 2008, compared with 5.0% GDP growth..."

[Polish_Silver]

Iceland in the "Inside Job"

In Ferguson's Documentary "Inside Job", there is a 5 minute section on Iceland.

One of the Fed board visited there, had a posh meal, and wrote an article praising the country's financial system. That helped the influx of foreign investment, which drove their currency bubble.

When asked what the basis was for the glowing review, he said that you talk to a countries central bank, ask if they are doing "due dilligence" , get good vibes, then write an article. You are not expected to look at balance sheets, asset prices vs incomes and profits or any boring stuff like that.

Our political system is not moving in the direction of reform. I don't see how a crisis will make the voters understand what is going on and vote for change. Within the two major parties, there is no real choice at the ballots. Minor parties cannot get a seat in congress, so why vote for them?

Real change requires a new party getting power, something nearly impossible under the current regime. Hence the need for a proportional representation system.

[doom&gloom]

Re: Iceland in the "Inside Job"

Inside Job is a 'must see' movie. I bought a copy just to support the directors efforts rather than wait to rent it or watch it on uTube. People like Ferguson should be supported..

[Polish_Silver]

"Inside Job" Great for Occupy

Inside Job is a 'must see' movie. I bought a copy just to support the directors efforts rather than wait to rent it or watch it on uTube. People like Ferguson should be supported..

I organized an IJ screening for the local occupy group. I think the discussion went well.

I regret to say the local occupy is now protesting the Keystone pipeline. I think educating the public about financial malfeasance, and preparing a political program was just not interesting enough. They want a physical place to hold up signs. Financial reform is not about a specific place or event. There is nothing to point to. It is a bunch legal, regulatory and poltical issues. Too abstract to get the blood boiling. Democracy is doomed!

[GRG55]

Re: "Inside Job" Great for Occupy

I organized an IJ screening for the local occupy group. I think the discussion went well.

I regret to say the local occupy is now protesting the Keystone pipeline. I think educating the public about financial malfeasance, and preparing a political program was just not interesting enough. They want a physical place to hold up signs. Financial reform is not about a specific place or event. There is nothing to point to. It is a bunch legal, regulatory and poltical issues. Too abstract to get the blood boiling. Democracy is doomed!

LOL. Reminds me of one of my sister-in-laws. She has it in her mind to knee-jerk protest anything and everything that might be proposed. Some years ago she was an organiser and vocal participant in a series of protests against a trunk line (pipeline) that was being proposed to bring natural gas to the communities throughout her region. The majority of the homes use heating oil in their furnaces in the winter. Being a petroleum engineer I naively thought some fact-based arguments would be helpful. Hah! The protests were successful (ecologically unsound, dangerous to public safety, motivated only by profit, all the usual stuff), the frightened politicians told the utility regulator to kill it and the project was shelved. They are still burning fuel oil in their furnaces (except those that can no longer afford it...they burn wood). I make little effort to seek her company, but during the mandatory family celebrations when we are forced to be together I can't help but inquire of her about her recent progress on the global warming issue. So far she hasn't tried to assassinate me...