Iceland close to bankruptcy

http://timesofindia.indiatimes.com/After_banks_nations_Iceland_close_to_bankruptcy/articleshow/3572258.cms

by visakhcr • 18 years ago

42 77 18 years ago

timesofindia.indiatimes.com

streety3• 18 years 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/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• 18 years 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• 18 years 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.

streety3• 18 years 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• 18 years 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.

streety3• 18 years ago

http://news.bbc.co.uk/1/hi/business/7658417.stm

Not only that but apparently good old Alistair has my back.

helveticaman2• 18 years 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.

vikram• 18 years 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.

pjesi2• 18 years ago

Actually no, they are not saying we are going bankrupt, the world media is.

marvin• 18 years 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.

pjesi2• 18 years ago

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

maxklein16• 18 years 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.

jmtame8• 18 years 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.

maxklein16• 18 years 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.

lst• 18 years ago

There are simply too many people deeply in debt, and for the majority of them there's no possibility to balance their financial situation -- and their number is increasing continuously...

maxklein16• 18 years ago

Yes, many people are in debt, but they converted the debt to assets. And those assets are still around. They have to produce value to be able to finance those assets, and so in all, it balances itself out. In economic terms, I don't see how population debt is bad for an economy. If this 'debt' was paid from money that was excess in the economy anyways, then for the country, there is no direct loss.

Let me explain.

A bank has $10.000. The government gives then $2000 for free.

You come to the bank and ask for $1500. They give it to you. Over the next 4 years you work for an employer, giving him about $4000 of value. Of that, you pay $500 in taxes, payback $2000 to the bank and keep §1500 for yourself. The bank makes more money, the government makes more money, and you had to work harder to stay in the same spot.

Debt is a way to make slaves of citizens, but for the economy, it is good because it forces productivity out of people.

tom_rath4• 18 years ago

Wow.

It just occurred to me that folks here younger than 28 have never seen an actual recession (I'm assuming that under-12s could not care less about business news and missed the early 90s bust). It's just been one long boom for you, right?

I suspect the world is about to surprise you in a very unpleasant way.

maxklein16• 18 years ago

You want to bet? I say there will be no recession, you say there will be a recession.

Sure, I've never seen a recession, but that does not mean that I am unable to differenciate a real problem from a manageable problem.

McCain was right - the fundamentals of the economy ARE strong. A recession starts at the bottom - it starts when people stop spending. It does not start at the top. What is happening right now is just a restructuring. A flesh wound, one could say.

run4yourlives3• 18 years ago

Heh, I think the same thing every time this topic comes up here on HN.

I don't think it's just the young though. I think a lot of people have forgotten how bad things can get. The last real recession was in the early 90's for most. Unless you were heavy into tech stocks or worked in the industry, the only thing that you noticed about the dot com boom was the superbowl commercials.

It's amazing how people believe that things will stay the same forever. When we're booming, it will always be that way, when it's bust, life will never get better.

I for one am looking to profit as much as possible on people's ignorance, but I know that won't be easy when I'm having to make my own cut backs.

astine2• 18 years ago

So long as the factories run, miners mine, and farmers farm, it's true, society will see this through. But you must understand that what's at stake is our very ability to do these things.

Merely producing goods is not enough; we need to get them to consumers and consumers need to be able to compensate the producers. To this end, we need a financial system through which wealth can easily and painlessly be transfered. Without a healthy financial system, simple things like employment, commerce, shopping, become difficult if not impossible.

Key point: write all the code you want; without a financial system nobody will be able to pay you for it.

True, we'll get through this eventually, the financial system will change and adapt to new circumstances, such is the nature of the market, (It would happen faster if the government wasn't so insistent on propping up the very institutions that were failing.) but it will take a while, and in the meantime, jobs, commerce, industry, all will suffer, especially those elements dependent on easy liquidity and cheap credit, like startups.

Long story short: You should be very worried. Protect your assets. Focus on tangible goods and increase your productivity. Realize that excessive 'trust' is what got us into this mess in the first place, and weather the storm accordingly.

maxklein16• 18 years ago

What caused this problem was excessive liquidity and the tendency of people to gamble. The U.S needs to get more material, and this correction is part of that.

noonespecial• 18 years ago

Think of the value (real wealth) in the system (the farmers farming, etc) like ships. The financial system (the money, the credit, etc) like water.

We need both. If all of the water freezes, the ships are still technically there. The wealth still exists, but there's shit-all the boats can do but wait for the spring thaw if they're frozen in the ice.

rsheridan62• 18 years ago

People were producing a lot of value in every previous recession and depression too.

bluelu• 18 years 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• 18 years 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).

dualogy2• 18 years ago

"Missing"? "Money itself isn't lost or gained, it's simply transferred."

whacked_new• 18 years ago

Or printed.

nihilocrat• 18 years ago

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

cjenkins• 18 years 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• 18 years 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• 18 years 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• 18 years 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.

Iceland close to bankruptcy

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