What? Come again?

This was such an interesting discussion, with thoughtful arguments on both sides… until … you … came along. What was that about capitalism failing and communism being the answer? WHERE did that come from? What confused chain of reasoning brought you there?

Let’s compare the environment under Communism in normal times. This comes from somebody who’s actually lived in it, as opposed to read about it. Everybody has a low paying job; in fact everybody MUST have a job, lest they be imprisoned; travel outside the country is strictly prohibited; people that do flee the country have their families imprisoned, impoverished, and humiliated; basic food and clothing are scarce, long lines prevail everywhere (I remember my grandmother waking up at 6AM every day to go wait in line); there’s only one type of bread, shoes, notebook, car, etc.; all young people (<30 years old) live with their parents because they cannot afford their own place; most people have never seen chewing gum or bananas or oranges; there’s only one television station which is only on for 3 hours every day with the regular Communist propaganda; the State employs close to 5% (hundreds of thousands) of the population in its Secret Service (think Nineteen Eighty-Four); should I go on?

Now contrast this to Capitalism in the times of crisis: unemployment is in the single digits; the poorest people in society are still better off than 90% of the rest of the world’s population; food and clothing are non-issues; there’s incredible variety and competition to provide basically any consumption good; freedom of speech prevails; property rights and personal rights are well enforced; anyone is free to travel about the world should they become dissatisfied with their society and country; lines are basically unheard of unless you are talking about dealing with the Government that is not much more efficient than your typical Communist Government; most young people are able to be independent and provide for themselves; your savings up to $250k are insured (in the US) – enough money to provide sustenance to your family for years (and the limit can easily be bypassed by depositing money with several unrelated institutions); etc etc

So yes, you are naive, and you are wrong.

Naive of me, I know. But I´m right nonetheless.

As for the Central Bank and Glitnir’s approach of them … as the Chairman pointed out, he went initially to have a talk with them about the crisis the bank was facing at that moment and to see if anything could be done to help them out temporarily. As he expressed it, he did not go begging for a loan initially. However, it seemed to set in motion an unforeseen series of events. And that ‘gross misuse’ comment by our Minister of Finance I find absolutely inane. But not completely unexpected from that man (he completely creeps me out).

As for what I heard in the hot pot, very glad you don’t agree. I’m sure we’re all praying for the rest of the banks to stay afloat.

One of the reason I visit this site is that Alda has so many international readers and it’s both fun and interesting to read their comments and take on things over here.

Reading through my comment again I can see that some might think that I was bringing the chairman’s character into question. Sorry…that wasn’t my intention. I simply think that he is one of the toughest businessman around and people might do well by reviewing the story of him buying a certain yellow trawler from Ísafjörður. There is nothing wrong with being a tough businessman…in fact it’s probably in the job description.

RK from LA. The Central Bank is a lender of last resort. Therefore I assume that all avenues were exhausted before Glitnir turned to the CB. Otherwise it would be a gross misuse of the CB as one politician in Iceland has pointed out. In fact, two lending lines that Glitnir had secured, vaporised when Lehman Brothers and Fortis bank went belly up. Therefore they couldn’t make payments on loans payable in October.

And keeping in mind that the CB’s funds are in fact the taxpayers funds I am comfortable that taking over Glitnir Bank in this way was the best way to secure taxpayers interest. After all…it’s always possible to give Glitnir’s shareholders something back in the form of an option to buy back shares at a lower price than the marketprice at the time.

And Alda. You probably shouldn’t sell it at a higher price than you bought it . Being a soon-to-be-an-ex-bank-employee myself (not Glitnir) I can safely say that this is not the general consenus within the banking community.

Anyway….bringing the Glitnir buyout plan into perspective. It’s size is about half the US bailout plan in terms of GDP of Iceland vs. the US. However, Glitnir is just one bank. The US bailout plan is meant to save the whole financial system over there.

Finally…for all you international readers out there. Now would be the perfect time to visit Iceland. It will not be cheaper anytime in our lifetime. Bring lots of cash please The weather is gorgeous at the moment as Alda will probably describe in a later post.