5 ms·

Iceland close to bankruptcy

42 points by visakhcr 18y ago

streety 18y ago
I found this to be an interesting read for the UK consumer perspective: http://www.fool.co.uk/news/your-money/savings/2008/10/07/iceland-in-crisis.aspx http://www.fool.co.uk/news/your-money/savings/2008/10/07/ice... Personally I have a significant sum of money in an icesave, part of Landsbanki, account. With the Icelandic government talking about every-country-for-itself the guarantee they have in place on the first £16k doesn't look that secure any longer.
- Xichekolas 18y ago
  What kind of rates were you getting? I heard tell of 10+%. Of course, if you lose the principal, it's not likely to pay off now, but still impressive.
  - Tichy 18y ago
    If someone offers you 10% interest, it is practically a given that the whole thing is not very trustworthy. I assume therefore that people investing in Iceland only did so with superfluous money that won't be missed too much.
  - streety 18y ago
    It was about 6%. Not market leading but competitive. The main reason why I opened the account was that it was one of the few ISA providers accepting transfers in. They have more of my money than I would be happy losing but I consider myself to be more fortunate than most. I believe my position, and salary, to be secure for the next two years and icesave only has about one-quarter of my savings.
- felixmar 18y ago
  I've just read that ING has bought the British savings accounts from Landsbanki and another Iceland bank. That means your money is safe.
  - streety 18y ago
    http://news.bbc.co.uk/1/hi/business/7658417.stm http://news.bbc.co.uk/1/hi/business/7658417.stm Not only that but apparently good old Alistair has my back.
  - helveticaman 18y ago
    Don't want to get all diggity here, but...perhaps instead of trusting suits with your money, you might want to put them in a special kind of atoms that don't rust...or decay radioctively...It's kind of retro, but throughout history, it's been a sound thing to do.
    - maxklein 18y ago
      Are you talking gold? That's just silly. you know how little Gold there is compared to the needs of the world? And you know that a gold based economy basically puts all the power in the hands of those who physically own the gold - what happens to countries like Chad and so on?
      - dualogy 18y ago
        #1 -- Well he didn't suggest that everyone do it. #2 The actual amount available at any given time is not so important as over time whatever amount there is reflects whatever "amounts" of goods, services, value and labour "exist". You have the same the other way around with the paper money supply. Increase it, and "over time" there's just as much "inflation" (not a price increase BUT a money devaluation) to cover that. So how much gold Chad has compared to other countries matters exactly zero.
      - jmtame 18y ago
        If you are actually arguing in favor of a fractional reserve system, I fail to see any logical support for that. A fractional reserve system has two truths, two facts: 1) The debt will always become greater in a country, because the money is debt in the first place. 2) The income disparity will always increase, meaning you will never be able to overcome poverty, sickness, or even war. The very way the fractional reserve system works is by nature transferring wealth from the lower and middle-class to the upper, and from there it goes to a few very wealthy, very elite.
vikram 18y ago
The PR skills of Iceland's government are terrible. They keep saying OMG we are going to go bankrupt. Surely then no one is going to lend them any money. I don't think other countries aren't asking for debts to be repaid. Then it's just the creditor of the banks which are asking for their money. Presumably the savers want to take their money out. So it's a run on all the banks of the country. But since they already nationalized the banks, surely they just have to print more currency. The currency takes a hit and it feels like Russia in the 80s, but it's probably still better than other outcomes.
- pjesi 18y ago
  Actually no, they are not saying we are going bankrupt, the world media is.
  - marvin 18y ago
    There's not a chance the Icelandic government will actually go bankrupt. It would be historic. Sovereign states do go bankrupt once in a while, but I've never heard of one choosing to bankrupt itself in order to partially pay off the bad debt of a corporation. If Iceland has obligations to some of these companies, they'll likely just default on the debt. The end result would be the same, but perhaps with somewhat less political turmoil.
pjesi 18y ago
My interest rate at Landsbankinn was around 14%, which is normal because of the high interest rate from the Central Bank (15.5%).
maxklein 18y ago
I'm not worried. All this is just hype, things are quite fine in the world. Money does not disappear until value does, and people are still producing a lot of value.
- jmtame 18y ago
  What you should worry about are two things, regarding value: 1) You should worry when your country produces significantly more "money" than your country produces value. See Bailout Bill (I fail to see the value produced in writing up $700 billion taxed on firefighters and teachers). 2) You should worry when organizations like IMF and the World Bank extend loans to these other countries, jack up in the interest and take up more than half of the country's budget on the interest instead of the principal. Most of the countries we "help out" end up becoming more impoverished after we extend a loan to them, and much of what we build ends up doing more harm than good. Worse, the money does not even exist in the first place.
  - maxklein 18y ago
    It's not my country - harr harr! The U.S may not produce as much money as it produces value, but it still produces more value than any country in the world! That value is not going anywhere. Seriously, don't be afraid. This is a media recession. If this were a real economic problem, companies would be tightening their belts, buying shares, merging, selling off stuff, and the vultures would be there pecking at carcasses. It's not happening. The papers make things sound bad, but imagine you didn't read the papers. When you go out, things are pretty much the way they always where.
    - run4yourlives 18y ago
      Please name which products that the world relies on the US to produce. Exactly.
      - maxklein 18y ago
        Google, Boeing, Ford, Windows XP, iPhone, Nike, Levis, McDonalds, Coke. That's just by looking around the room I am sitting in.
bluelu 18y ago
Another indicator that the USA made a great job at selling their debts to other countries, where entire states have now to pay for the greed of a few people. Each cent that is missing now (which went to american banks when they were selling these products) has to paid by the entire world now.
- ph0rque 18y ago
  > Each cent that is missing now (which went to american banks when they were selling these products) has to paid by the entire world now. This leads to a fantasy bailout scenario: the whole world who has lent America money agrees to forgive 50% of America's debt (or any other large percentage) in return for America's military getting out of other countries (and staying out for at least 10 years).
- dualogy 18y ago
  "Missing"? "Money itself isn't lost or gained, it's simply transferred."
  - whacked_new 18y ago
    Or printed.
nihilocrat 18y ago
Hey, as long as EVE Online (CCP) doesn't go under, I'm straight.
- cjenkins 18y ago
  I'm guessing they're actually doing pretty well in this situation. I'd hazard to guess that a lot of their revenue comes from subs in the US and Europe (aka dollars and euros). As inflation goes crazy on Icelandic krona, you figure the salaries they're paying to their people takes up less and less of the cash they pull in each month.
gwsaines 18y ago
I couldn't get a handle on what assets were falling away from the Icelandic banks. The article says that they weren't mixed up in the now toxic subprime assets, so is it just the credit crunch that is inhibiting Iceland banks from making short run payments, or are their assets crumbling in other ways? Anyone care to explain? When I was in school taking econ courses every day I was always so informed about this stuff. I feel so ignorant now!
- gills 18y ago
  I have heard they have too much debt denominated in foreign currencies. Their recently-deregulated banking has been a major economic growth area for Iceland (read: levered to their eyeballs). The global instabilities pretty much pulled the rug from under their feet, and their productive economy is not large enough to be likely to pay off the debts; so their currency gets dumped. That makes it harder to pay the foreign debts, and each failure to pay further damages the currency. I think they will almost certainly have to default.
jdavid 18y ago
doh, i actually was hoping that iceland was more shielded from this than japan. maybe, if they go through this first, they will be the first to succeed post Credit Crisis.

42 points by visakhcr 18y ago

I found this to be an interesting read for the UK consumer perspective: http://www.fool.co.uk/news/your-money/savings/2008/10/07/iceland-in-crisis.aspx http://www.fool.co.uk/news/your-money/savings/2008/10/07/ice... Personally I have a significant sum of money in an icesave, part of Landsbanki, account. With the Icelandic government talking about every-country-for-itself the guarantee they have in place on the first £16k doesn't look that secure any longer.

Xichekolas 18y ago
What kind of rates were you getting? I heard tell of 10+%. Of course, if you lose the principal, it's not likely to pay off now, but still impressive.
- Tichy 18y ago
  If someone offers you 10% interest, it is practically a given that the whole thing is not very trustworthy. I assume therefore that people investing in Iceland only did so with superfluous money that won't be missed too much.
- streety 18y ago
  It was about 6%. Not market leading but competitive. The main reason why I opened the account was that it was one of the few ISA providers accepting transfers in. They have more of my money than I would be happy losing but I consider myself to be more fortunate than most. I believe my position, and salary, to be secure for the next two years and icesave only has about one-quarter of my savings.
felixmar 18y ago
I've just read that ING has bought the British savings accounts from Landsbanki and another Iceland bank. That means your money is safe.
- streety 18y ago
  http://news.bbc.co.uk/1/hi/business/7658417.stm http://news.bbc.co.uk/1/hi/business/7658417.stm Not only that but apparently good old Alistair has my back.
- helveticaman 18y ago
  Don't want to get all diggity here, but...perhaps instead of trusting suits with your money, you might want to put them in a special kind of atoms that don't rust...or decay radioctively...It's kind of retro, but throughout history, it's been a sound thing to do.
  - maxklein 18y ago
    Are you talking gold? That's just silly. you know how little Gold there is compared to the needs of the world? And you know that a gold based economy basically puts all the power in the hands of those who physically own the gold - what happens to countries like Chad and so on?
    - dualogy 18y ago
      #1 -- Well he didn't suggest that everyone do it. #2 The actual amount available at any given time is not so important as over time whatever amount there is reflects whatever "amounts" of goods, services, value and labour "exist". You have the same the other way around with the paper money supply. Increase it, and "over time" there's just as much "inflation" (not a price increase BUT a money devaluation) to cover that. So how much gold Chad has compared to other countries matters exactly zero.
    - jmtame 18y ago
      If you are actually arguing in favor of a fractional reserve system, I fail to see any logical support for that. A fractional reserve system has two truths, two facts: 1) The debt will always become greater in a country, because the money is debt in the first place. 2) The income disparity will always increase, meaning you will never be able to overcome poverty, sickness, or even war. The very way the fractional reserve system works is by nature transferring wealth from the lower and middle-class to the upper, and from there it goes to a few very wealthy, very elite.

vikram 18y ago

The PR skills of Iceland's government are terrible. They keep saying OMG we are going to go bankrupt. Surely then no one is going to lend them any money. I don't think other countries aren't asking for debts to be repaid. Then it's just the creditor of the banks which are asking for their money. Presumably the savers want to take their money out. So it's a run on all the banks of the country. But since they already nationalized the banks, surely they just have to print more currency. The currency takes a hit and it feels like Russia in the 80s, but it's probably still better than other outcomes.

pjesi 18y ago
Actually no, they are not saying we are going bankrupt, the world media is.
- marvin 18y ago
  There's not a chance the Icelandic government will actually go bankrupt. It would be historic. Sovereign states do go bankrupt once in a while, but I've never heard of one choosing to bankrupt itself in order to partially pay off the bad debt of a corporation. If Iceland has obligations to some of these companies, they'll likely just default on the debt. The end result would be the same, but perhaps with somewhat less political turmoil.

pjesi 18y ago

My interest rate at Landsbankinn was around 14%, which is normal because of the high interest rate from the Central Bank (15.5%).

maxklein 18y ago

I'm not worried. All this is just hype, things are quite fine in the world. Money does not disappear until value does, and people are still producing a lot of value.

jmtame 18y ago
What you should worry about are two things, regarding value: 1) You should worry when your country produces significantly more "money" than your country produces value. See Bailout Bill (I fail to see the value produced in writing up $700 billion taxed on firefighters and teachers). 2) You should worry when organizations like IMF and the World Bank extend loans to these other countries, jack up in the interest and take up more than half of the country's budget on the interest instead of the principal. Most of the countries we "help out" end up becoming more impoverished after we extend a loan to them, and much of what we build ends up doing more harm than good. Worse, the money does not even exist in the first place.
- maxklein 18y ago
  It's not my country - harr harr! The U.S may not produce as much money as it produces value, but it still produces more value than any country in the world! That value is not going anywhere. Seriously, don't be afraid. This is a media recession. If this were a real economic problem, companies would be tightening their belts, buying shares, merging, selling off stuff, and the vultures would be there pecking at carcasses. It's not happening. The papers make things sound bad, but imagine you didn't read the papers. When you go out, things are pretty much the way they always where.
  - run4yourlives 18y ago
    Please name which products that the world relies on the US to produce. Exactly.
    - maxklein 18y ago
      Google, Boeing, Ford, Windows XP, iPhone, Nike, Levis, McDonalds, Coke. That's just by looking around the room I am sitting in.

bluelu 18y ago

Another indicator that the USA made a great job at selling their debts to other countries, where entire states have now to pay for the greed of a few people. Each cent that is missing now (which went to american banks when they were selling these products) has to paid by the entire world now.

ph0rque 18y ago
> Each cent that is missing now (which went to american banks when they were selling these products) has to paid by the entire world now. This leads to a fantasy bailout scenario: the whole world who has lent America money agrees to forgive 50% of America's debt (or any other large percentage) in return for America's military getting out of other countries (and staying out for at least 10 years).
dualogy 18y ago
"Missing"? "Money itself isn't lost or gained, it's simply transferred."
- whacked_new 18y ago
  Or printed.

nihilocrat 18y ago

Hey, as long as EVE Online (CCP) doesn't go under, I'm straight.

cjenkins 18y ago
I'm guessing they're actually doing pretty well in this situation. I'd hazard to guess that a lot of their revenue comes from subs in the US and Europe (aka dollars and euros). As inflation goes crazy on Icelandic krona, you figure the salaries they're paying to their people takes up less and less of the cash they pull in each month.

gwsaines 18y ago

I couldn't get a handle on what assets were falling away from the Icelandic banks. The article says that they weren't mixed up in the now toxic subprime assets, so is it just the credit crunch that is inhibiting Iceland banks from making short run payments, or are their assets crumbling in other ways? Anyone care to explain? When I was in school taking econ courses every day I was always so informed about this stuff. I feel so ignorant now!

gills 18y ago
I have heard they have too much debt denominated in foreign currencies. Their recently-deregulated banking has been a major economic growth area for Iceland (read: levered to their eyeballs). The global instabilities pretty much pulled the rug from under their feet, and their productive economy is not large enough to be likely to pay off the debts; so their currency gets dumped. That makes it harder to pay the foreign debts, and each failure to pay further damages the currency. I think they will almost certainly have to default.

jdavid 18y ago

doh, i actually was hoping that iceland was more shielded from this than japan. maybe, if they go through this first, they will be the first to succeed post Credit Crisis.