The (Looking Likely) Fall of Iceland

[rj1]

After nationalizing Icelandic bank Glitnir, the Icelandic krona has been falling dramatically in value, and is now only ranked above the currencies of Zimbabwe and Turkmenistan.

When was the last time a western European-style capitalist country has suffered hyperinflation? (I don't consider Argentina or Mexico western European-style countries.)

[Mega]

Re: The (Looking Likely) Fall of Iceland

They can pay in COD....!
Mike

[Supercilious]

Re: The (Looking Likely) Fall of Iceland

Iceland is one big hedge fund attached to one big fishing trawler. If any of these two components of their economy sinks, they are in deep .... cold water.

[D-Mack]

Re: The (Looking Likely) Fall of Iceland

Iceland is one big hedge fund attached to one big fishing trawler. If any of these two components of their economy sinks, they are in deep .... cold water.

They still have warm geysirs and hot springs....


http://updatecenter.britannica.com/e...7&rendTypeId=4

[buljong]

Re: The (Looking Likely) Fall of Iceland

Nowhere to run...
Nowhere to hide...

Freezing cold..

[phirang]

Re: The (Looking Likely) Fall of Iceland

At least they have free geothermal power...

[metalman]

Re: The (Looking Likely) Fall of Iceland

At least they have free geothermal power...

looks like iceland didn't get finster's deflation memo... credit crunch, failing banks, weakening currency, rising inflation... it's like an itty, bitty usa...

Iceland Scrambles for Cash to Save Banks, Economy

Decision Makers Consider Selling Pension-Fund Assets Held Overseas and Seeking Aid from Nordic Central Banks

REYKJAVÍK, Iceland -- Iceland's government and banks scrambled Sunday to find the cash needed to rescue the country's banking system and cushion an economy that is one of the hardest hit by the global financial crisis in the developed world.

Iceland's banks swelled during the booming economy in recent years, lending heavily overseas. Now markets are penalizing the nation of 300,000, worried that its banks may not weather the credit crunch and the government won't be able to afford to bail them out.

The krona, Iceland's currency, has plummeted, imports have dropped, inflation is soaring and consumers are putting the brakes on buying as household debt costs climb. The crunch is threatening to make the island nation a showcase of the worst it can deliver.

...

The global credit crunch seized up this lending machine. Last week, the government effectively nationalized Glitnir, putting in €600 million for a 75% stake. In a parliamentary address Thursday, Prime Minister Geir Haarde warned Icelanders of "the inevitable cut in living standards" to come.

On Friday, the price of insuring Iceland's sovereign debt through credit-default swaps leapt to roughly a 20% annual premium, amid concern that the government would be stretched too thin if called upon to stand behind its banks. The krona swooned 10% last week against the euro. It is off more than 41% against Europe's common currency for the year.

Kaupthing, Iceland's biggest bank, said its liquidity position remained strong and that the credit-default-swap market "lost all touch with fundamentals a long time ago." In a statement, its chairman, Sigurdur Einarsson, said: "We've got good asset quality and a highly diversified loan portfolio."

The country's debt-driven economy has been thrown into turmoil. "Look out there," said Johann Sigurdsson on a recent Sunday afternoon, pointing out the second-floor window of an Ikea store just south of Reykjavík. The gray skeleton of another big-box store is taking shape out on the rocky landscape. "They keep building these new shopping centers, but there are just not enough people for all of them," he said. Traffic at the 200,000-square-foot Ikea store was light. Grimur Eiriksson, looking for a couple of cabinets, compared the financial troubles to leaving home for a long weekend without bringing cash and then discovering none of your credit cards work either. "The scary thing is," he said, "nobody knows how long the weekend is."

Gudni Freyr Ingvason says food and gas are particularly painful, though "everything" is going up. By next year, he expects his mortgage payments to be 30% higher than they were when he took out the loan a year ago. At work, at a Reykjavík printer, paper costs 60% more than it did at the beginning of the year, squeezing his firm's profits.

The same factors -- the plummeting krona, punishing inflation and debt-laden household balance sheets -- are seizing up trade. Two years ago, Thorsteinn Jónsson and his wife, Katy Hafsteins, started a business selling decorative landscape adornments from an old fish-processing warehouse a few dozen yards from the Keflavík harbor. As Iceland's real-estate market swelled, business was brisk for wrought-iron birdbaths, garden nymphs and replica cannons.

But the pieces come from China and the Chinese want dollars. So do shipping companies: The price of moving a container from China to Iceland doubled to one million kronur from 500,000 kronur in the space of a few weeks, Mr. Jónsson says, seated at his desk opposite a row of upright frogs playing alto sax. Factor everything in, and Ms. Hafsteins estimates their costs in kronur have doubled.

"Everybody's holding their hands behind their backs" and has stopped buying, says Ms. Hafsteins. Faced with the unpleasant math, the pair has simply stopped importing. They hope they can sell their existing inventory and start anew next year, if the situation improves.
"Many people in Iceland are losing everything because of this," says Mr. Jónsson.

[Supercilious]

Re: The (Looking Likely) Fall of Iceland

looks like iceland didn't get finster's deflation memo... credit crunch, failing banks, weakening currency, rising inflation... it's like an itty, bitty usa...

Iceland Scrambles for Cash to Save Banks, Economy

That's not nice metalman... when you don't have arguments it's not nice to do an attack by conjecture

FDI = Finster's dollar Index

I don't think that Finster had produced any chart showing the FKI (Finster's Krona Index )

Plus not forget that Borgartún bears very few similarities with Wall Street.

[metalman]

Re: The (Looking Likely) Fall of Iceland

That's not nice metalman... when you don't have arguments it's not nice to do an attack by conjecture

FDI = Finster's dollar Index

I don't think that Finster had produced any chart showing the FKI (Finster's Krona Index )

Plus not forget that Borgartún bears very few similarities with Wall Street.

disinflation = currency strengthening. this is a revelation?

[Supercilious]

Re: The (Looking Likely) Fall of Iceland

disinflation = currency strengthening. this is a revelation?

That's priceless ...

[cschx]

Re: The (Looking Likely) Fall of Iceland

Looks like USDISK went exponential today:

http://quotes.ino.com/chart/?s=FOREX_USDISK

Just out of curiosity, anyone playing ISK?

[metalman]

Re: The (Looking Likely) Fall of Iceland

That's priceless ...

tough teaching engineers econ 101... they already think they know everything so they have to reinvent very old wheels.

[Supercilious]

Re: The (Looking Likely) Fall of Iceland

tough teaching engineers econ 101... they already think they know everything so they have to reinvent very old wheels.

Wow are you an engineer? You are forgiven. Sorry, it was my mistake to believe that only business school freshmen can be so assertive when releasing enormities and talking about things they don't understand.

[metalman]

Re: The (Looking Likely) Fall of Iceland

Wow are you an engineer? You are forgiven. Sorry, it was my mistake to believe that only business school freshmen can be so assertive when releasing enormities and talking about things they don't understand.

[Supercilious]

Re: The (Looking Likely) Fall of Iceland

Metalman you will never be able to learn anything just by peeping through a cracked door into a room where others are talking about such trivial subjects such as Calc 102 and Econ 101.

Just, have some courage, open the doors, get out of that little dark space full of skirts and and learn to close your mouth and open your ears, when you have no idea what they are talking about

And remember, Yves Smith is not a "clueless" person when we are talking about banking. ;)