News from our fair isle, March 24-28.
The government unveils its master plan
Without a doubt, the biggest story this week was the government’s announcement of how they’re going to make good on their Big Election Promise. As some of you may remember, the party now in power – the Progressive Party – promised prior to the last elections to introduce measures to relieve the tsunami of debt that swept over Icelandic households in the wake of the economic meltdown. Everyone who had a mortgage saw it increase exponentially as a result of the devaluation of the krona, and inflation. Icelandic mortgages are indexed to inflation, meaning that the principal of your mortgage goes up as inflation rises. To give an example, we bought our apartment 12 years ago and took out a mortgage of x amount. We have paid religiously every month for those 12 years, but our mortgage is now considerably higher than the x amount we initially took. Which is completely f*cked up. And just imagine what it’s like for people who took out large mortgages at the height of the real estate bubble, just before the meltdown in 2008, whose property immediately devalued after the meltdown, while their mortgages went up. Those people now owe far more than their property is worth and are either struggling to keep up, or have already lost their homes – and usually a sizeable chunk of their own money that they invested, as well. It’s happened to quite a few people I know – folks who were in no way irresponsible, who did everything right.
Anyway. Bad, bad situation, and the Progressive Party promised before the elections to lower those mortgages that had expanded as a result of the fiasco that was the meltdown. When asked where they planned to find the massive amount of dosh required to fulfill thr promise, they had a quick and ready answer: get it from the hedge funds who still have loads of money trapped in Iceland from before the meltdown [and which cannot be removed because of the currency controls]. Their reasoning was that the hedge fund owners would be so desperate to get their money out that they would agree to leave behind a hefty sum, which in turn would be used to correct those housing loans. UNDER NO CIRCUMSTANCES WOULD ICELANDIC TAXPAYERS BE STUCK WITH THE BILL. This was repeated over and over, like a mantra.
Right. So lots and lots of people bought into this rhetoric and voted them into power. Then they waited to see their mortgages corrected. And waited. And waited. In the meantime the government found time to do all kinds of important stuff like lower taxes on the fishing moguls and pause accession talks with the EU. But not address the concerns of the little people.
Until this week. Two years into their election term. And oh, how sweet the results. First, the corrections will be in the form of people being able to take out their private pension savings to pay down their loans or buy their first home. Whoopee: we get to use our own money to pay down our inflated mortgages. [And that's assuming we have private pension savings - lots of people do not.] The second part will consist of the financial institutions being ordered to lower the principal on mortgages – a loss in revenues that they will demand back from the state. And the state, as we know, is the Icelandic taxpayers.
NOT A WORD about the big bad hedge funds or their alleged taxation. That idea has completely vanished into thin air.
Once again, this current government outdoes itself in effrontery and outright treachery. Unbelievable.
And because I’ve run on a bit …
Just a few links to round off week.
Iceland’s euro dreams vanish along with EU. A well-written and researched article about the current state of the Icelandic economy under currency controls. My take on said article [links to Facebook].
Don’t buy from Icelandic whalers, with ads posted all over public transit vehicles in Boston. When will Icelandic authorities abandon their stubborn stance on whaling and realize they’re sacrificing far more interests than they’re gaining?
Auroracoin. I’ve got mine. Don’t know where it’s going to go, but I like the punk aspect of it and am very, very curious to see how this experiment will play out.