So, I thought we’d have an outage, but as it turned out – we didn’t. It just took a while for the Intertubes to switch from seeing the blog on the old server to the new one … and how long that takes varies from one computer to another. In fact, some people may still be seeing the old site for a few hours yet and will have NO IDEA that there’s actually a new blog post up here, which makes me feel curiously smug.
But enough about that.
We’ve had a few other things going down here in Niceland in the last couple days. Like, everything going to sh*t [what else is new?]. The Icelandic media has been full of stories lately of people who are fed up and have decided to stop paying their mortgages – whether out of dire necessity, or in protest of what they see as the government’s incompetent handling of the issues faced by the general public. After all, billions of crowns are being written off in the banks, while the “little people” – us – have to bleed and pay our [rising] debts in full.
It’s understandable, but not very sensible, and if it becomes a major trend it could collapse the whole system, which would be disastrous.
Meanwhile, remember old Björgólfur Guðmundsson, former owner of Landsbanki [and several other companies]? He saw reason yesterday to send the media a detailed statement of the reduction in his assets over the past few months, because he wants to give an “honest account” of his situation. He now owns a mere 10 percent of what he owned a few months ago [the true value of which was, to put it midly, highly debatable] and is facing bankruptcy and, quite possibly, the loss of his house. Granted, he took on a lot more personal liabilities than the other moguls, some ISK 58 billion, but – hey. It’s really just kind of hard to feel sorry for someone who drove his assets into the ground and took a lot of other people down with him. Especially when he sends out a statement to the media in what appears to be a thinly-veiled effort to evoke pity. Call me callous, but there it is.
Still, I have to admit that I have [a bit] more time for him than for his former business partner in Landsbanki, Magnús Thorsteinsson. He has just been declared bankrupt – the first of the Icelandic moguls to hold that honor. He, too, took on some personal liabilities, but unlike old B. he evidently does not plan to stand by his obligations and has moved his legal domicile to Russia. All of which gives even more weight to the allegations that Landsbanki was used as a money-laundering station for the Russian mafia in recent years. I’ll saynomore.
I SHOULD PROBABLY STOP NOW
Before all this dripping sarcasm collects in a pool around my feet and ruins my rug. It’s a bit chilly out there, a bit windy too, but the sun has been forcing its way through the clouds. It came up wery wery early this morning, or at 4:46 am, will set at 10:05 this evening. Right now it’s 6°C or 43 F.
INCIDENTALLY!
One of Iceland’s most forceful bloggers, Lára Hanna, has recently launched an experiment to have experts answer readers’ questions in her comments section. Today she’s got Prof. Michael Hudson, former Wall Street economist and White House advisor, who is one of the main champions of Iceland defaulting on its debts [which he rightfully sees as debts belonging to the private sector being transferred to the public sector, i.e. us the taxpayers]. All this is happening over here – if you don’t speak Icelandic you won’t understand her post, but you will understand the questions and answers in the comments. She’s also posted a video of Hudson being interviwed on Silfur Egils a few weeks ago [in English]. You might also want to read Hudson’s thought-provoking article from a few days ago, entitled Will Iceland be Handed Over to a New Gang of Kleptocrats? It’s long, it’s anti-EU, but it gives some very illuminating insights into many of the big issues facing Iceland today, including our horribly unfair quota allocation system and the whole business surrounding Icesave.
{ 15 comments… read them below or add one }
I watched the old dodger and his wife a couple of years ago in the food court at Kringlan , both were dressed to the nines and neither bought anything; they were just surveying their kingdom. She in particular, was the standout with the painted face of a Parisian street whore but her head was held high so you could say she was a class act in the wrong environment.
with the painted face of a Parisian street whore
Now now, be nice!
According to RÚV his assets are now worth between 15 and 20 billion Icelandic krónur (sorry I’m not really sure how to calculate our Monopoly money into real currency), while he still owes the old Landsbanki just under 60 billion krónur. That would make him at least around 35 to 40 billions in the red.
I’m just as callous as you, he was after all the owner of Landsbanki who is responsible for the whole Icesave debacle, shorting the króna against Icelandic consumers and pension funds and other questionable enterprises. I’ll save my sympathy for people who actually deserve it.
Oops, that should be “40 to 45 billions in the red”
The father is a known fraudster for years in Iceland – Hafskip etc – and his son has salted billions to other countries. The father goes down in flames and the son then helps him out etc. Please , please, wake up!!!
I have to admit that I employed a sarcasm about Iceland as some kind of money-laundering institution long before the actual crash hit. When I was talking with friends about how Iceland had come to be flooded by money just two years ago, we found this explanation very plausible – still somehow in jest then but nevertheless not very farfetched as this article in Iceland Review from as early as 2005 shows. Favouring this guesswork was the odd history of the two Björgólfurs accompanied by fraudulent bankruptcy, making a fortune in the brewery business in Russia etc. .
I noticed a particularly anti-EU bent in Michael Hudson’s article. I was formerly under the impression that joining the EU might be beneficial to Iceland. Am confused! Need help sorting this!
And regarding the mortgage walkouts (also addressed splendidly clear by Mr. Hudson) I don’t really blame these people for wanting to scare the government into action by threatening further economic fallout. (Not to sound all anarchist, but…) The inflation-indexed “creditor’s fee” of 17% on top of the existing 6~% mortgage rate is just nuts. Especially for those who unfortunately took loans in Yen or Euros…
Gunnhildur – I’ll save my sympathy for people who actually deserve it. — yep, like that single mother of four on the news this evening.
Peter – don’t worry, we get it!
LDE – it’s definitely wery wery suspicious …
Jessica – well, people are split on the EU question and everyone has an argument. As for the indexing, I agree it is nuts, but it won’t affect the foreign currency loans. If the krona ever strengthens, those loans will decrease. It’s just the Icelandic loans that will go up due to indexing, and won’t go back down.
The krónur loans are fairly simple to deal with: you merely have an act of parliament that links them to the CBI interest rate or to the REIBOR, just like in a civilized country. The 6% differential over inflation is simple theft: here in Spain, domestic mortgages have a differential of 0.5–1.0% over the EURIBOR.
Foreign currency loans are more difficult, but they need to be converted back into krónur: the problem is, at what exchange rate? They should never have been allowed in the first place, but they’re there now and need cleaning up, like a pool of vomit on the kitchen floor after an overly excessive party.
Aha! Thanks for clarifying the indexing on the loans. So basically what you’re saying is that a person with a mortgage is screwed either way in this situation: either you’ve got indexing on Icelandic loans, or a highly undesirable exchange rate with the foreign loans….
Physchim62 for Finance Minister!
Jessica – you got it!
Here in the UK we have a system to stop people like that leaving for Russia or wherever. Take Sir Fred Goodwin for instance, the worlds worst banker, destroyer of the RBS, We give him a government approved couple of million plus a seven hundred thousand pound per year pension, with immediate effect………Works every time!!
Well said Colin Matheson, and as ever, well said Alda in keeping us informed of events in used-to-be-niceland. Trying to get sensible international news through UK media is increasingly impossible as they are pre-occupied with swine-flu, celebrity tossers and deep dark doodo.
Note to self, well that 16 day holiday certainly made you feel better!
dave
I’ve not been overly impressed with Hudson to date. I haven’t read that article – I just skipped to the Icesave bit, where he proceeds to get basic facts wrong.
It was fair enough back in Oct/Nov for people to be confusing which law was used against which bank, but not now.
Regarding loans, I suppose the problem with removing indexation is that it transfers the effects of inflation from the milk-cows to the Icelandic banks and hence to the government which has to recapitalise the banks. Still, it has to be done as otherwise the government is going to end up with banks facing massive defaults and seizing assets that they can’t sell = more recapitalisation needed. Best get it over with quickly, upfront and without creating more homeless/squatters.
For the foreign currency loans, does anyone know how the money flows? So an Icelandic household debt is a new bank asset, but is the original funding in the new bank or the old? I suspect the latter, which makes life much easier for the government – create a loss in the new banks now and the bond paid to the old banks is smaller. Wait and you still get the loss, but you also have to pay a larger bond. Or am I missing something here?
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