if you want to play as an adult, you have to accept the consequence as such… in winning or losing

>You might call Icelandic consumers gullible, I would call them people who have been brought up with a dysfunctional notion of money

it’s irrelevant: when you decide to trust, you forfeit duty of exam/skepticism, not of responsibility.
Responsibility for the decision itself and its consequences, even if you cannot conceive them out of gullibility or ignorance.
I could understand eventually “it seemed a good choice at that time…” but not “why me?”

- Yes, companies are allowed to restructure their debt. Individuals are thrown into harsh bankruptcy proceedings.

- Yes, you were told to put down 25% on any loans. In Iceland the message has been quite different. You could argue about individuals having to take responsibility for their own actions. But financial literacy in Iceland is scarily low. Therefore the message since 2002 has been to invest with as little as possible, otherwise you’d be missing out on something awesome. You might call Icelandic consumers gullible, I would call them people who have been brought up with a dysfunctional notion of money.

- Correct me if I am wrong but isn’t it clear in the US that the position of the customer vs. the financial institution is considered to be uneven, that is that the customer is not supposed to be the financial expert, but the bank is, and therefore more responsibility must be directed at the bank? If I went into a bank and asked for a loan for my 12 year old in her name to buy stocks and the bank approved it, then no-one in their right mind would claim that the contract is a valid one. She is a minor and if I am oblivious to the fact that she is not allowed to collect debt, then the bank has the responsibility, it is supposed to know these things. (Oh, wait a minute, this happened at Glitnir/Islandsbanki and both parent and financial institution signed the contract)

- I agree with you that there should be non-recourse mortgages everywhere. But the thing here is that the banks hold the winning lottery ticket on every mortgage through the consumer price indexation. They have actually in many ways benefited from situations which lead to rising inflation, strangely as it sounds.

- Because of the CPI and the Icelandic Krona, the laws of personal finance taught in Europe and the US do not apply. A friend saw her mortgage rising rapidly in 2008, a safe, small CP-indexed loan in Icelandic Kronas. Having lived and studied in the US, she immediately brought out her savings. A few months later, no savings, no job, no severance payments because the company went bankrupt and … the mortgage back to where it was.

- BTW, Hassan has to pay for Bjorgolfur Thor’s sea-cable, Jon Asgeir retaining Hagar, Olafur Olafsson retaining Samskip, IceSave and the small matter of billions upon billions in debt left over from David Oddson’s time in the Central Bank. In his position, I believe he and so many other Icelanders who have never posed as financial experts are allowed to ask, “Why Me?” and “What the hell just happened?”

However, borrowers should take some responsibility: put down a deposit and don’t borrow too much. As a rule of thumb, I’ve always been told – don’t borrow more than 3 times your income. So, roughly 25% down as a deposit (ok , you may have a little room here or there, but roughly thats a decent amount) and don’t borrow more than 3 times.

If I were in a debt situation where it seemed impossible, I would do the following:

i) Figure out the total debt.
ii) Figure out what you can afford to pay, after reasonable living expenses.
iii) Go to a citizens advise bureau (or Icelandic equivalent or cheap lawyer), ask them to present a plan to your creditors.

You go to your creditors and give them a plan – it means you’ve taken the initiative and they are far far more likely to simply accept your proposal – its easier than arguing with you.

You will get a -much- -much- better deal out of them, if you send them a plan. But I think they are more likely to accept your proposals (even if it means them writing off some debt) and move onto someone else, than they are argue with you.

That would be my advice. Take the initiative – ensure you are calculating enough to live off – allow for emergencies etc – and then present a plan. In the interim, you could email creditors and say
‘Dear Sir/Ms,
I understand I may be in arrears with my account. I’m putting together a plan to address this. You should have the plan by . Please bear with me in the interm.
Regards,

‘

Job done. Then get onto the plan, get some help putting it together.

You know thousands of companies go through ups and downs and have to restructure their debt, you’re just doing the same.

http://en.wikipedia.org/wiki/Compassion

Now ask yourself one question. Will it be different if you ever suffer any form of misfortune?

http://en.wikipedia.org/wiki/File:EconomistHomePrices20050615.jpg

Now ask yourself one question. Will it be different for the UK, US and Australia ?

Australia a couple of year behind ?
http://www.thebull.com.au/articles_detail.php?id=1372

“First Home Buyers with the most vulnerable jobs, lowest incomes, and the lowest net worths, have thus been enticed into debt at a time when the rest of society is busy de-leveraging”

That said, Australia has Commodities – China needs them, so that will keep Australia out of recession. Australia still has immigration of course.

That said, Australia is in housing bubble, no doubt about that.

I must admit that we were very careful not to borrow more than we could afford on one of our incomes (just in case) though it would still be a struggle.

The situation is Iceland’s government and banks really mucked up. Everybody knows that. The problem is not that they mucked up but what is now the best solution for a bad situation: not only for the depositors but also the borrowers. If you just tip people out of their homes if they are in default then you have a social problem and *somebody* has to pick up the tab for the long term down stream financial and social consequences. If it was a few % the system can handle it but 20 or 30% I personally don’t think so. At the extreme do you want a society where the dispossessed revolt and string up those with money and bankers from the nearest lamp-post? It has happened in the past and certainly is not in anybody’s “financial models” of the likely outcome. I don’t think the current problem solely rests with the borrowers, but they certainly should bear a considerable cost and also in no way profit from their poor (in retrospect) decision.