The Situation in Iceland - Icelandic Government Falls

http://www.itulip.com/forums/showthread.php?t=5738

I don't have a lot of time to post on this, but there seems to be surprisingly little good reporting on it. It appears that the State of Iceland is bankrupt. The value of the krona is in freefall, the Stock exchange is closed and the banks, with vast liabilities many times higher than GDP have been nationalised.

The reaction of other States, in particular Britain, has been fury rather than sympathy, as the Icelandic banks are unable to reimburse the millions of private and public deposits that were made into the British branches of Icelandic banks.

There are a number of very clear parallels between Iceland and Ireland's economic position - low national debt, loans many times GDP, "assets" comprising mainly real estate and commercial investment, much of it in the sinking UK market.

The situation in Iceland is desperate, with many people having lost everything. A large Russian loan has been offered, but it is unclear if this would make Iceland solvent. Perhaps we could use this thread to follow the situation there, and to learn anything we can from it.

The Russians got in quickly. The Icelandic premier said he interprets Gordon Brown's comments as being an attack on Iceland's interests. All they have left to trade is their huge geographical military strategic importance. The issue may now be whether Iceland wil leave NATO. This is a big big deal.

Iceland deserves to be where it is at the moment. Ireland, for all its faults, didn't buy very much into the derivatives ponzy scheme in the way Iceland did. Ironically, the ability to create a property bubble in our own back garden saved us from the excesses of derivative betting. Mind you the fool(s) that paid €195 millions for an acre in Ballsbridge showed we didn't need to enter that particular game.

Iceland was leverage to the hilt on an economy of c. 250,000 individuals, and a very weak currency to boot. It then decided to start betting on the CDS market as well and sought international capital in the form of individual deposits to fund their involvement in the derivatives markets. I can fully understand why the UK is angry, although it is a bit like the kettle calling the pot black.

Iceland's made its own bed and whoever gets into bed with them now will extract their pound of flesh. I imagine the EU could fund Iceland but with some tough caveats on the economy, but the political will of both parties is stretched at the moment. I expect calmer heads to prevail once the stock markets settle this week and the new capital starts to flow into European beds. The EU, imo, is not about the let Russia slap bases in between the EU and North America.

Rocky

IMO The EU should seek to help Iceland. The Geopolitical consequence of surrendering the north Atlantic are too big a risk. That said I do think it is high time we started to properly normalise relations with Russia. I would sooner do business with the Russian Mafia than an American Bank or financial institution.

Squire wrote:

Rocky

IMO The EU should seek to help Iceland. The Geopolitical consequence of surrendering the north Atlantic are too big a risk. That said I do think it is high time we started to properly normalise relations with Russia. I would sooner do business with the Russian Mafia than an American Bank or financial institution.

I agree and I have to believe the EU won't let the Russians gain influence. Given the trillions in new capital being talked about by various govts, bailing out little old Iceland will cost peanuts.

A bit of hyperbole on the mafia thingy, but I get your drift. tomato or tomato, or as that US VP once wrote potatoe.

Majority of Iceland's MPs want to join the European Union now anyway, according to Deutsche Welle. As various Commissioners have stated, Iceland could become a member of the Union within one year of application though membership of the €uro would obviously come much later.

I would be with Squire on it, membership of the Union for Iceland should be very much encouraged.

What about Russia? Would they join too?

cactus flower wrote:

What about Russia? Would they join too?

I doubt they would want to, and I doubt they'd get in with their track record on democracy.

Don't think Russia has any interest in joining the European Union, cactus. Unless you have any information which you want to bring to the issue.

If they want to join and comply with our requirements over a sustained period, in regard to economic policy, democracy, the rule of law and the protection of minorities outlined in the Copenhagen Criteria, then why not.

Seems to be a very hypothetical question though.

Never say never, who knows how the wheel will turn in the next 20 years. I can see nothing but benifit coming from greater cooperation with Russia. Positive engagement is needed.

we'll swap the cod for loans to bail out their economy.

where england failed, we'll succeed!!!!

Fishing policy is one of the greatest barriers to their membership.

youngdan wrote:

The Indians are doing OK any that survived. The other two will be angry.

The Irish are the new Indians, you heard it here first

If you saw "the Commitments", we are the new blacks.

The situation in Iceland is pretty well what we [the Irish] would be facing if we were not in the Euro. The British have taken a reprehensible role.

http://www.independent.co.uk/news/business/news/britain-has-devastated-our-economy-iceland-complains-976905.html

http://www.icenews.is/index.php/2008/11/15/large-turnout-for-reykjavik-protests

Quote :

The Foreign Office insisted there were still strong ties between the two Nato allies but said anti-terror laws could be invoked when Britain faced a "threat to its financial security". The Chancellor, Alastair Darling, ordered the seizure of Icelandic assets after he became worried by emergency loans made to the island's banking system by Iceland and Sweden's central banks.

On 7 October, the Financial Services Authority seized Heritable, an offshoot of the Landsbanki bank. A day later it took control of Kaupthing, Singer and Friedlander and Landsbanki's assets in the UK. Mr Darling claimed the move was necessary to protect British depositors. He told the BBC that the Icelandic government had "told me they have no intention of honouring their obligations" – but Reykjavik has strenuously disputed this claim.

Kaupthing's case could involve a £2bn High Court damages claim against Mr Brown and Mr Darling for misfeasance in public office. Richard Beresford, a partner at Grundberg Mocatta Rakison, the firm of solicitors representing Kaupthing in the UK, said the main thrust of the lender's case was that Britain wrongly applied legislation introduced to nationalise Northern Rock to seize KSF's assets

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This is a description of Iceland:

appel
Member Join Date: Apr 2008
Posts: 589

Iceland situation

I've not written anything about the situation in Iceland for just over a week now. Here is the latest from my perspective as an Icelander.

- The Central Bank lowered interest rates last week from 15,5% to 12%. However, because of agreement with the IMF before the weekend, interest rates were raised to 18% today.
This means companies and individuals, that are already struggling to pay loans, will suffer even more. No new loans at all from anywhere.

- The IMF agreement last week gives us $2.1 billion to prop up our currency. This is not enough, and we're seeking an extra $4 billion from other countries, the Fed, ECB and Scandinavian CB's.

- It is estimated that economic contraction will be around 10%.

- It is estimated that 20% of companies will not be able to pay payroll this month. I have a feeling a lot of companies are just "ghost" companies, people still working, but the company is essentially bankrupt.

- Massive layoffs in the construction industry, and the banking sector of course.

- Inflation roared to 15,5% this month, expected to rise.

- Our currency is still worthless and still not traded overseas. Although there was a news today that hinted there was some trade with the ISK, where it was less than half the value that our CB claims.

- I must note that there are no shortages (yet) of food, fuel and medicine, or much else I've noticed. But if current situation continues then we could see some shortages, but not of necessities. However, because of rationing of foreign currency other importers are not able to import new supply of e.g. clothes, industry material etc. I expect many companies not being able to continue their operations because of import restrictions.

- The sovereign state has not yet defaulted on any loans, despite statements in the foreign media. It requires a lot of help to get back on it's feet, and seems to be getting it soon.

- A lot of families are "stuck" in their homes, cannot sell, cannot move, cannot buy. The mortgage debt is around 10-40% higher then the value of their homes. Home value is expected to drop significantly in the coming months.

- The government owns all the banks, and indirectly owns all the media, and all the debt of the people. With taxes and debt payment the people are in a state of servitude to the government. Not many realize this.

- Some conspiracy theories are on the icelandic forums that the government is censoring the media, directing them to mitigate the news. They own all the media after all!

- Many are considering strategies out of this, e.g. husband and wife divorcing and allowing one of them to default on the debt and go bankrupt, while the other one keeps a clean slate. Some are thinking about fleeing to another country.

- The government has been able to offer a temporary freeze on payments on mortgages, 4-6 months. The depression is expected to last at least 1 year, maybe 2 years.

- There are some protests, but they seem to be minor. There is general calm, but still anxiety, frustration, over the situation. I expect things to get a lot worse when people lose their jobs and have nothing better to do than to protest.

I think the coming friday/monday is the big reveal moment, e.g. who pays the payroll and who doesn't. Just then we'll realize how serious the situation is. I expect thousands to lose their jobs.

How does once a free-market capitalist system, with the highest standard of living in the world, the most freedom of the press in the world, the happiest people in the world and least corrupt people in the world turn into a Orwellian fantasy almost overnight is beyond me.
__________________
There's a reason why they call it the "golden parachute".

https://www.kitcomm.com/showthread.php?t=26956

The hot air balloon
A man in a hot air balloon notices that he is losing height. He then notices a woman on the ground so lowers his balloon a little further and calls to her: “Excuse me! Can you help me? I promised to meet my friend and hour ago, but I don’t know where I am.”

The woman answered: “You are in a hot air balloon which is hovering at a height of ten metres, between 40 and 41 degrees north and between 59 and 60 degrees west.”

“You must work with computers,” said the man.

“I do indeed,” answered the woman. “How did you know?”

“Well,” the man replied, “All that you just said is technically right, but I have no idea what I’m supposed to do with the information, and am therefore still lost. It’s fair to say you’ve not really helped me at all. If anything, all you have done is made me even later.”

The woman replied: “Ah, you must be a politician.”

“Yes,” the man said in surprise. “But how could you know that?”

“Well,” she said, “You knew neither where you were, nor where you were going. Only hot air has got you to where you are right now. You actually admitted you don’t have a clue how to sort out your situation, and you expect people below you to sort out the problem for you. And you are now in the same situation as when we just met, but now all of a sudden it’s my fault.”

Blogs by Icelandic students: http://icelandsays.blogspot.com/

More news on Iceland. I'm surprised at the lack of comment on the British use of anti-terror legislation as a financial instrument against Iceland. It seems to have been a gross act of bullying, and to have multiplied Iceland's difficulties in trying to deal with their situation - reputedly caused by the acts of 20 people out of their population of 300,000.

17/11/2008 - 06:58:35
Iceland’s prime minister offered government guarantees on Icesave savings deposits in Iceland and Holland of nearly €20,500 on each account.

Prime Minister Geir Haarde said last night the next step would be for Iceland to hold talks with the United Kingdom and other EU countries on how the payments would be made.

It was not immediately clear how the deposits would be covered. The total amount is estimated to be about 600 billion Icelandic kronar, nearly €3.5bn.

Mr Haarde said he hoped other countries would help cover the costs and that additional funds could be raised by selling off the bank’s assets.

Relations between London and Reykjavik plummeted last month after Britain used anti-terrorist legislation to freeze the assets of collapsing Icelandic banks in a bid to protect British savers’ deposits.

The savings of about 230,000 British depositors’ money vanished when Icesave’s parent bank, Landsbanki went into receivership in October.

Max Keiser on the Alex Jones Show. They are saying that 30% of Icelanders are now trying to emigrate from the country. Keiser's radio clip on the Al Jazeera channel gets played where he suggests the solution to the G20 problems is to issue a Fatwah against Paulson for counterfeiting bonds.

(Keiser is some financial genius who created software which anticipates how markets are moving by sniffing out signs on the world wide web or somewhere)