"Gigantic loans, it has been revealed, were taken out abroad by a few individuals and without the full knowledge of the Icelandic people. Now the nation seems to be responsible for having to pay them back….."[1]
The modern version of the Viking Raiders set out to buy up Britain's High Street using $250,000 of borrowed money for every man, woman and child in Iceland.
2009 – February 1st. Following the resignation of the previous cabinet (see January 26, 2009), a new government is formed in Iceland by the Left-Green Movement and the Social Democratic Alliance. The new government will be in office for only a few months, until fresh elections in the spring.
2009 – January 26th. The Government of Iceland resigns.
2009 – January 25th. Power to the People! The Minister of Commerce and Banking announced his resignation this morning. He moreover announced that he had dismissed the director and board of the Financial Supervisory Authority. Meanwhile, the Central Bank board operates under the auspices of the Prime Minister who has done nothing but declare his unfailing devotion to Davíd Oddsson and his cronies at the bank. elections will be held this spring. That’s definite. And it’s a huge relief, although the greatest worry is that there won’t be any renewal within the political parties and that all we will have is the same old people, whom nobody trusts any more.
2009 – January 23rd. Prime Minister of Iceland Geir Haarde calls a general election for the spring, two years early.
2009 – January 20th. The Icelandic finance ministry says the country’s economy is forecast to shrink by 9.6 percent in 2009. In addition, it predicts no growth in 2010.
2009 – January 20th. It’s 10 pm and the protests are intensifying
2008 – December 24th. 2008 – December 24th. A crowd gathers outside an Icelandic bank. “Pay your own debts,” they yelled as they visited one bank office after another in Iceland’s capital. “Don’t make the children pay.”
2008 – December 18th. IMF Says Financial Stability of Iceland Has Improved
2008 – December 2nd. Icelanders Storm Central Bank
2008 – November 26th. The annual rate of inflation in Iceland rises to a record high of 17.1 percent.
2008 – November 20th. Credit collapse numbs Icelanders. Some analysts are predicting that inflation will reach up to 30% this winter. Jobs are being lost at a rate of up to 5,000 a month. In a country whose entire population is only 300,000, the impact is huge. Many monthly mortgage payments doubled overnight when the value of the Icelandic Krona crashed.
2008 – November 20th. IMF approves loan to Iceland. Iceland becomes the first Western European nation to get an IMF loan since Britain in 1976.
2008 – November 15th. ‘The Big Chill”. Gigantic loans, it has been revealed, were taken out abroad by a few individuals and without the full knowledge of the Icelandic people. Now the nation seems to be responsible for having to pay them back….. And here is the nub. Iceland's banks borrowed more than $250,000 for every man, woman and child in Iceland, and placed an impossible burden on the modest reserves of the central bank in the event of default. And default they have. 23
2008 – November 3rd. Inflation in Iceland (caused by high levels of borrowing in the country and by large investment sums flowing in, in response to high interest rates) 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.
2008 – October 28th. Icelandic Central Bank Raises Interest Rate to 18% from 12% due to problems in the country’s banking system.
2008 – October 20th. Iceland’s financial authorities formally announce the establishment of new Glitnir, Landsbanki, and Kaupthing banks. The old banks were taken over by the government two weeks previously as their condition had deteriorated due to the global credit crisis.
2008 – October 17th. Iceland Defaults Triggering More CDO Woes
2008 – October 15th. Iceland Cuts Interest Rates from Record High of 15.5% down to 12%.
2008 – October 9th. The Economist noted that Icelandic households took on a large amount of debt, equivalent to 213% of disposable income, which led to inflation.
2008 – October 8th. Britain uses anti-terror legislation against Iceland. Icelandic Government seizes the country’s largest bank, Kaupthing. The assets of Landsbanki were frozen by the British Government.
2008 – October 7th. Icelandic Government takes control of the country’s second and third largest banks - Landsbanki and Glitnir.
2008 – October 6th. Icelandic Government guarantees all deposits in local banks. Trading in Major Icelandic Shares Suspended.
2008 – October 5th. A rumour that Iceland is in danger of not being able to get food and oil due to the lack of credibility of its currency. Iceland’s currency is in free fall as inflation and interest rates rage upward.
2008 – September 29th. Icelandic Government takes large stake in the country’s third-largest bank, Glitnir. The bank ran into short-term funding problems.
2008 – September 22nd. Qatari Royal Buys Stake in Soon-to-Collapse Icelandic Bank
2008 – September. In the 12 months leading up to September 2008 the inflation rate in Iceland was 14% compared to a target of 2.5%. The Central Bank of Iceland held interest rates high (15.5%). Overseas investor money poured into the country in response, leading to monetary inflation. The money supply grew 56.5% in the twelve months to September 2008. This compared with 5.0% GDP growth.
2008 – May 19th. Scandinavians arrange emergency funds to keep hedge fund pirates from destroying Iceland.
2008 – March. The cost of private deposit insurance for deposits in Landsbanki and Kaupthing was already far higher (6–8½% of the sum deposited) than for other European banks.
2008 – February 22nd. Financial Website Warns of Icelandic Bank’s Instability, Bank Will Later Collapse
2007 – February 1st. The króna, which was ranked by The Economist in early 2007 as the most overvalued currency in the world (based on the Big Mac Index),[115] . The Icelandic currency further suffered from the effects of carry trading.
2001 – Banks deregulated in Iceland. This set the stage for the Icelandic banks to acquire huge debt when foreign companies were accumulated.
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[1] The big chill
Financial Times, Sat 15 November 2008
By Robert Jackson
http://www.ft.com/cms/s/0/8641d080-b2b4-11dd-bbc9-0000779fd18c.html?ftcamp=rss&nclick_check=1
3 comments:
The latest reports out of Iceland are that the rubber is about to hit the road. The Icelandic public is going to be confronted with having to pay the bills for the debt agreement Iceland has made with UK and Netherlands, and they may well balk when they see it. The current government may fall, which has both anti-EU and pro-EU factions within it, which may put the politicians back into power that brought on the whole mess.
I remember back in my grammar school days (late '30s, early '40s) learning that Iceland should have been named Greenland and Greenland should have been named Iceland to reflect their true climate conditions.
So it was in 2001 by deregulation that Iceland finally prospered after so many years of glacial economic growth. This lasted about 7+ years. Perhaps the bubble was frozen to keep it from popping earlier.
Growing up in the Boston area (where I continue to reside), I grew up with many Irish Americans and learned much of the travails in Ireland going back to the potato famine and that continued to bring Irish to America until just a few years ago when many returned to Ireland to enjoy its thriving economy that was subsidized by favorable tax arrangements attracting corporations to establish operations there. Much of the credit was attributable, so the story goes, to the quality of eduction in Ireland even during the bad economic times; that the Irish workforce was so well educated, compared to other countries, that it was natural that Ireland would prosper. Alas, the Blarney Bubble has burst. So now the stories are that many are leaving Ireland to return to the US for jobs. The Celtic Tiger turned out to be just another pussycat.
Over my lifetime (I just turned 79), there have been many success stories of nations turning things around and prospering. Some might have attributed this to globalization and free markets, and how well they work. It was not just Iceland and Ireland. Think of Asian nations that were thriving. (Some still may be.) It seems that these success stories get quite a bit of press and create quite a bit of ethnic pride. Perhaps that press helps to inflate the bubbles. (Think of the business books of just a few short years ago lauding corporate success stories only to see many of them fail. Perhaps a worthwhile book project would be to focus on such books and tell us what happened to those once successful corporations - and the authors of those books.) Perhaps Joseph Schumpeter's creative destructionism applies to nations as well as to businesses.
Barkley
Yes. I have a sense that something is about to break and it's not just in Iceland.
shag,
The Murdoch and Fairfax press are still busy lauding praise on Australia's continuing economic bubble. Much hooflalah, for instance, about the multi-billion dollar deal done between (what we are told) is Australia and China over natural gas. The reality is that Chevron, ExxonMobil and Shell own ALL of this large field, of the Western Australian coastline. They are part of a network of foreign transnationals selling off up to 20% of Australia's liquid natural gas (LNG) supplies when Australia is home to only 2% of the worlds LNG resources.
These are the invisible bubbles; The quickly depleting resource bases around the world.
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