In the eye of the storm

Right now I’m in Iceland – the eye of the storm that is the financial crisis that seems to sweep over the world. Especially Iceland has been struck hard by the economic severities. The 2008 Icelandic financial crisis involves all three of the major banks in Iceland and their seizure by the government. In late September, it was announced that the Glitnir bank would be nationalized. The following week, control of Landsbanki and Glitnir was handed over to the Financial Supervisory Authority (FME). Soon after that, the same organization seized Iceland’s largest bank, Kaupthing. The current economic climate in the country has affected many Icelandic businesses and citizens. According to my girlfriend Sara, 15 people have killed themselves as a result from the “kreppa” (as it is called in Icelandic).

The job losses are of course one of the things that is the most serious and noticeable thing for common people. Many people have lost their jobs and there are more to come. Iceland’s GDP is expected by economists to shrink at least 10 percent as a result of the crisis, putting Iceland by some measures in an economic depression.

There are less people than before on the streets and you can’t go anywhere without hearing people talking directly or indirectly about “kreppan”. We’ll see where it ends. I am sure they will get back on their feet, it will just take awhile to do so.

The causes are many, but the most important ones are mixing idiotic nationalism with privatizations in the intermediate time between the nationalistic socialist age of Iceland (-1991) and the capitalist expansion age (1991-2008), and an economic bubble which basically is the result of investors overestimating the true value of the Icelandic króna.


About tegis

This blog belongs to Carl-Mikael A. Teglund - tegis. Swedish emigrant with a heart for languages, philosophy, history, and politics (classical liberalism in the European tradition). Go ahead and look, read, or listen. I'm sure you will find it interesting.
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8 Responses to In the eye of the storm

  1. Elizabeth says:

    What are the worst and best case scenarios? What’s the solution? Would Iceland ever have to seek assistance or possibly merging with another country to save itself? I don’t know much about Icelandic government or finance. They don’t teach us cool stuff like that here.

  2. tegis says:

    Well, I mean I bet it is a little bit of an extra study to know about the financial situation in Iceland for an American ;). They’ve sought for assistance from you guys but didn’t get it. The only countries that now stand up for them are the other Nordic countries, but it is not enough so they have had talks with Russia and the IMF about lending money for saving their economy. The worst situation for everyone would of course be if Iceland as a country would go bankrupt. But it’s not very likely, other countries have so much interest in that country and their banking system they simply wouldn’t allow it to fall. The best scenario would be if the Icelanders say yes to joining the European Union and stop bitching with their nationalism etc and realize they need Europe. But that includes of course then that the EU still wants them.

  3. Elizabeth says:

    That’s interesting. You said so long ago during your Purple States debut that debt can be a positive. Well, here’s a perfect example, right? Your debt is so embedded in other countries it wants to keep you alive to pay them back. Am I on the right track?

    What natural resources does Iceland contain?

  4. tegis says:

    Yes. Debts and other sorts of interests have gone globalized as well. That means that we are more dependent on each other nowadays than before. You are def. right on track. Problem is that some countries are not to trust so we can only hope that other countries come here quicker. I’m talking about Iceland’s talk with Russia. That’s a worrying development. If Russia lends out money they’d probably ask something in return (most certainly). And that would probably be a military solution. For almost 50 years America had a military base in Iceland (Keflavik). It wouldn’t surprise me if Russia would ask for something alike in return. With nukes in Iceland they could easily throw missiles at NYC and Paris and London …

  5. tegis says:

    Iceland is very rich on natural resources. The country is self-maintained with electricity because of it’s huge geothermological power industry. Basically it has to do about natural gases and hot water from hot pots and geysers that are totally crowding the country. 🙂

  6. Elizabeth says:

    I would hope Russia wouldn’t have a motive to nuke the U.S., or any other country for that matter. I was a little hesitant when I heard about the Russian Navy vessels heading down to Venezuela. Chavez isn’t exactly a fan of the us. I would be very uncomfortable if the allied against us. We aren’t in a good position for that. Would the Icelandic government be able to put restrictions on the use of foreign military on their soil?

    I have an idea! Why don’t you guys just ask America? We already borrow everything from China, and then we will charge you interest like we do other countries and then no one can go to war because we all owe each other money! Sounds like a plan.

    I think the middle east is laughing at all of us right now.

  7. Elizabeth says:

    I’ve heard about the healing muds of Iceland, actually. Hot Springs are my favorite destinations and locations. A few great ones are in Colorado, particulary Steam Boat Hot Springs. Really awesome.

    So with all the geothermic power you guys have, is drilling the only way to harness this? How does Iceland view our battle over resources? Do you, I suppose personally, feel that we should be taking advantage of our own natural resources, or turn 100% to alternatives?

    I am an environmentalist, believe it or not. I think a question for many other environmentalists would be shouldn’t you use what the earth produces? I’ve found myself in a rough spot over the issue lately.

  8. tegis says:

    Well, they bombed a small neighbor (Georgia) just like less than a month ago. They didn’t really have reasons for that either. Of course they won’t bomb the US like Georgia. You guys still have almost the double military strength than the whole world combined. Which is good. Which is bad is that US is on the low right now and is probably going to shelter itself more and more during the next couple of years. Russia will be on that, be sure about it. And if they have control over Iceland it will get easy to get to the US of course. Iceland can’t do anything because these guys don’t even have a military. But Iceland is also a member of NATO which is a security for you and Britain. Problem is though that this tiny island is really pissed at the moment at you because you refused giving them loans in their time of need, basically because you were up to here with your own sh**. 🙂 So now they say that they will seek for new friends. We see how it goes. Newest news say that Norway won’t allow that and are doing everything they can together with my country Sweden to avoid Russia to get their grip over Iceland. They don’t want Russian battle ships in their shores …

    you should def. use your natural resources. Everything else is just bogus. But at the same time you should devote a lot of money and time for research and development of new technology on the field…that is true environmentalism, if you ask me 🙂

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