Thursday, October 9, 2008

Iceland crisis

A man in Reykjavik sent the following report to a Financial Times journalist:
They are fighting powers that they are powerless to fight. . . .

The main supermarket can’t get imported goods because they have no currency. The shops are half empty. One of the store managers has advised people to start hoarding. We’re running out of oil. And winter came last night - about a month early.

The Icelander's advice to statesmen?
Apply international political pressure to get a few billion euros… dollars or pounds. We’ll take what we can get.
BBC reports that the Krona has fallen by 50% against over the past 12 months, inflation is at 14%, and interest rates at 16%. London Times concludes its report on Iceland's frozen economy with a few words about the upside:
There is almost no unemployment - Iceland's investment boom was created in a textbook enfranchisement of the population with privatisations and the creation of tradeable fishing rights, allowing a large section of the population to monetise their right to the sea's annual harvest. The Icelandic financial bubble will burst but the underlying economy will thrive.
Der Spiegel reported back in April that Iceland's banks had gambled their future on CDS (Credit Default Swaps) which I discussed here.

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