Iceland at the brink of failure

[Pale Blue Dot]

Source: Investment News

Iceland’s economic meltdown, fueled by its exposure to foreign debt, could bring the country to the brink of failure, according to research from Hennessee Group LLC.

“Iceland had one of the highest standards of living in the world just a few months ago,” said Charles Gradante, co-founder of the New York-based hedge fund advisory firm.

“Now after experiencing the fastest economic collapse in history, Iceland is suffering from soaring unemployment, as well as double-digit interest rates and inflation.”

According to Hennessee’s research, the primary contributor to the rise and fall of Iceland’s economy was its growth as an international lender.

After privatizing the banking sector in 2000, the country’s banks went from being largely domestic lenders to major international financial intermediaries with foreign assets worth nearly 10 times Iceland’s gross domestic product. This was up from two times GDP in 2003, according to Mr. Gradante.

Read more: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090217/REG/902179967/-1/RSS02&rssfeed=RSS02

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Iceland will probably be the first of many.

[LakeSamish706]

1. I suspect Ireland will be close behind.... What happens when they fail? n/t

[Veritas_et_Aequitas]

3. You know the difference between Iceland and Ireland?

One letter and three months.

[LakeSamish706]

4. Yep, and I heard on DU just the other day that they are not in good shape... n/t

[depakid]

19. Ireland has recourse to the European Central Bank

Iceland does not.

Big difference.

[provis99]

15. wasn't Ireland

the country all the right wingers were pointing to a few years ago as an example of successful capitalism? Interesting if Ireland is now being run into the ground by the capitalism they so willingly adopted.

[alfredo]

30. It was one of Milton Friedman's "success" stories. Too bad he won't be

around to spin his massive failure.

[izquierdista]

31. More shit to throw on his grave

He probably has the prettiest flowers in the WHOLE cemetery considering the amount of fertilizer under them! :rofl: :rofl:

[alfredo]

36. No, nothing grows over his grave. Birds fall out of the sky if they

happen to fly over. Light from the sun is diverted away from his grave.

[Veritas_et_Aequitas]

2. I always wondered what would happen if a country's economy completely collapsed.

But I meant more as a thought experiment, not an actual scenario. This is definitely not good.

[TheCoxwain]

6. look at zimbabwe -

you will have hyper inflation - a loaf of bread will cost a million dollars and the supermarket shelves will be empty ..


be careful what you wish for.

[Veritas_et_Aequitas]

9. Only if they try to dig their way out by printing millions and millions of new currency notes.

On one hand you'll have horrifying inflation, but on the other hand, all the debt you owe to foreign governments and institutions becomes worthless practically overnight. Well, at least if its being held in your currency.

[TheCoxwain]

11. It is different if you are the United States

Every other country has international debt in Foreign Currency ( most commonly the USD) ... But we get to hold it in our currency ...


Given our indebtedness - if we go down we take everyone down with us ....

[Veritas_et_Aequitas]

12. I did not know that.

Well, the first part.

Maybe this is how Bush was planning to win the war on terror - destroy the worlds' economies so international terrorism becomes financially difficult and more or less pointless.

[FarCenter]

24. Not really true

China, for example has about $600 billion in US treasury bonds.

If they dump them, they lose $600 billion, which is less than we have spent in Iraq.

On the other hand, in return for their $600 billion, they would defeat the world's sole superpower. While for our $ trillion we only defeated a third rate power.

[TheCoxwain]

33. How is it not true?

China will get screwed big time if it tries to dump US dollars in one shot -

Firstly China's currency is pegged to US dollar - Just the rumor that china is trying to offload US$( say in exchange for Euros or some other basket of currencies) will lead to a run on the USD and the Yuan will spike big time - Chinese exports will become uncompetitive ( atleast in the US).. Actually I am not even sure how it will play out exactly - But upheaval is guaranteed. And so is the destruction of China's Credibility. Who the heck will want to do business with an untrustworthy partner? In short China has no option but to keep running on the treadmill ..


They can move away from USD only gradually and US can absorb that very well - Infact - we will actually benefit from it in the long run by the way of stimulation of US industries - although it will lead to inflation in the short run as all the Chinese imports will become expensive and Wallmart might go Bankrupt (YAY!)

[mbperrin]

35. Or they could recycle those dollars by simply buying assets, companies, plants,

resources within the US, especially with many on sale now.

Poof! Dollars vanished, replaced by real stuff.

[TheCoxwain]

37. Um .. its not that simple

It is not as if China is sitting on piles of cash -they hold treasury notes ( which is as good as cash - so far atleast)


they will need to sell that ( and I cant think of anyone with $600 billion to spare) before they can exchange it for real assets .. That is a hard thing to do in this environment

[Ediacara]

21. The difference between Iceland and Zimbabwe is that Iceland is willing to drop the kronur ASAP

Mugabe and Gonno have this ridiculous attachment to the Zimbabwe dollar. Although Iceland hasn't talked to the ECB formally, they seem to be signaling that they're planning on adopting the Euro sometime this year.

[roamer65]

25. They may use the Euro, but they won't be a Eurozone member.

Iceland hasn't a shot in Hades of getting into ERM2, let alone being a Eurozone member.

[Ediacara]

27. That's true

But Kosovo and Montenegro unilaterally euroized, and I think that's what they're going to do in Iceland too.

[KamaAina]

7. Place "Weimar Republic" into your nearest search engine

and stand back... :scared:

[Veritas_et_Aequitas]

8. It didn't *completely* collapse.

If it did, Hitler would have been eaten for food.

[biopowertoday]

20. I have a close friend

in Iceland. He is in environmental education for many years. we email each other once in a while. He said it is very scary over there and no one knows what the heck will happen.

[ChairmanAgnostic]

5. Dick the Cheney did this to them.

"Reagan proved that budget deficits don't matter."

[Barrett808]

10. I keep worrying that we'll have to evacuate Iceland

No money to import food or buy fuel for fishing boats...

[Veritas_et_Aequitas]

13. Don't worry. It won't come to that.

It's more likely we'd let it lapse into a third-world country first.

[Ghost Dog]

16. Not a problem.

The cod has to be worth more than the fuel for the fishing boats,

so international barter trade would work.

And then there's the option of sail...

[qb]

14. Pay no attention to the headlines. Privatization = GOOD! Regulations = BAD

:sarcasm:

[Beetwasher]

17. "After privatizing the banking sector in 2000..."

That pretty much sums it up, huh?

[bemildred]

23. Yep. that pretty much explains it. nt

[Doremus]

18. Chalk up another one for Milton Friedman.

I certainly hope the people of Iceland have better luck than we do in punishing those responsible for their collapse.

Over here we throw them a party on our dime.

[bemildred]

22. I'm not sure what "failure" means here.

Is this like bankruptcy? Or political revolution? I'm sure it will still be there somehow. What is it that actually failed here? It isn't "Iceland" I'm sure, but I'm not clear on what it was.

[Doctor Cynic]

26. All the banks failed, the currency crashed, meaning it's almost impossible to wire money

into or out of the island. And this makes an almost Cuba-style blockade.

[bemildred]

28. Ah, de-globalization. nt

[unkachuck]

29. not to worry....

....Iceland has a super-hero to the rescue....Sportacus!



....Lazytown won't let us down....

[Brimon]

32. The Russians

There were claims recently that Russia has been laundering money through Iceland. It may be that Russia will bail them out to keep that avenue open.

[alcibiades_mystery]

34. Iceland will be a historical case study on the abject failure of free market ideology

Capitalism is now and always has been a catastrophe, as unworkable in practice as the lunacy of Soviet socialism (which was simply capitalist production in another form, in any case).

Milton Friedman and his cohorts should be as discredited as Khruschev. They are simply wrong about the operation of productive systems, and likely wrong about psychology, incentive structures, and all the other nonsenses they invented at the University of Chicago. The capitalist economists are simply incorrect, and Iceland will be the case to showcase that.

[LeftHander]

38. Canary in a coal mine....

We wonder why anyone cares about Iceland beside Icelanders....well it is is because Iceland does not have much in the way of resources except fish and geothermal energy.

So...the economy is a product of a larger global economic system....and is probably the most fragile in terms of absorbing the effects of this economic crisis.

So we all should be concerned because when the smaller more vulnerable economies start to fail it will grow like a cancer.