(Maybe you knew this already? Is this commonly known by those protesting?)
http://krugman.blogs.nytimes.com/2008/03/31/the-north-atlantic-conspiracy/March 31, 2008, 10:03 am
The North Atlantic conspiracy
Is Iceland the victim of a financial conspiracy?Such things really do happen. During the 1997-1998 financial crisis there was, almost certainly, a financial conspiracy against Hong Kong. According to the Hong Kong Monetary Authority, several major hedge funds engaged in a “double play”, shorting both the city-state’s stock market and its currency. The alleged plan was to put the HKMA in a double bind: it would be forced either to raise interest rates to defend the Hong Kong dollar — driving stocks down — or to devalue the currency. Either way the hedge funds thought they’d make a killing. They were, however, caught in a bear trap when the HKMA did the unexpected and bought up a large fraction of the HK stock market.
There was also, according to Australian officials I talked to at the time, a deliberate effort to drive down the Aussie dollar.
Now, Iceland is making similar allegations:
The cost to protect the bonds of Iceland’s three biggest lenders from default rose after central bank Governor David Oddsson said “unscrupulous dealers'’ are trying to break the country’s financial system.
…
Oddsson called for an international investigation into attempts to drive Iceland’s economy “to its knees,'’ in a speech on March 28. The central bank was forced to raise its benchmark rate to a record 15 percent last week to defend the krona after a 30 percent slump against the euro this year.
…
Attacks on the country’s Reykjavik-based banks “give off an unpleasant odor of unscrupulous dealers who have decided to make a last stab at breaking down the Icelandic financial system,'’ Oddsson said at the central bank’s annual meeting in Reykjavik. “They will not get away with it.'’
One interesting point: it appears that the Icelandic authorities particularly suspect Bear Stearns.
I’ll be keeping an eye on this.
http://krugman.blogs.nytimes.com/2008/04/09/the-plot-against-iceland/April 9, 2008
The plot against IcelandOn a gloomy North Atlantic evening in January, a group of international hedge fund managers gathered in the stylish bar of 101 Hotel in downtown Reykjavik at 8pm for a drink before dinner. They had been flown to Iceland by Bear Stearns, the US investment bank that two months later had to be rescued. Bear had organised the excursion to discuss the bizarre state of Iceland’s economy. What transpired at this dinner has entered into legend within Iceland’s close-knit financial community.
An executive who works with a big Icelandic bank recalls: “Upon entering the bar I was approached by one of the hedge fund managers. He informed me that all people in this party – except for him, of course – were shorting Iceland.” The executive says the fund manager described Iceland’s profit-making potential as the “second coming of Christ”.
“As dinner progressed – some people actually decided not to eat at all but just sit at the bar – and more drinks were downed, the conversation and questions started to get more hostile and short positions openly declared,” the executive says.
What started as an alcohol-fuelled evening has become a full-blown investigation by Iceland’s Financial Supervisory Authority into an alleged speculative attack by hedge funds on Iceland’s currency, banking system and stock market. Jonas Jonsson, director-general of Iceland’s FSA, says the authorities are “searching whether some parties have systematically been distributing negative and false rumours about the Icelandic banks and financial system in order to profit from it”.
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