Events

Last October (2008) the Icelandic banking system collapsed in a spectacular fashion. 3 out of 3 major banks were nationalized within one week. (Landsbanki, Glitnir, Kaupthing) It felt like all the stars were aligned against us.

People were angry and are angry. However there are a few bright points

- There is no hunger
- There are no homeless people
- Unemployment has still only reached 5% (this will go up though)
- The education level of the country is still good (perhaps a few risk managers need retraining though)
- The infrastructure is still here.

The dark point ofcourse is that the state went from being debt free to being one of the most in debt countries in the world with the highest policy interest rate (18%), a central bank without credibility, politicians who don't have a clue and a currency that has as much credibility as a Berhard Madoff (Made-off) fund .

So what happened? Ok first of all if you are asking BloggingReykjavik that you probably haven't been paying too much attention and should read up on the news first. However having been reading the book Hard Times, An oral history of the great depression by Studs Terkel. I came across a paragraph, from an interview with the American Industrialist Arthur A. Robertson, which could be describing Iceland:

Men who built empires in utilities, would buy a small utility, add a big profit to it for themselves and sell it back to their own public company. That's how some like Samuel Insull became immensely wealthy. The thing that caused the Insull crash is the same that caused all these frenzied financiers to go broke. No matter how much they had, they'd pyramid it for more.

While we do not live in 1930 I think that we could benefit from a history lesson and hopefully next time we get the balance right.




tags: Reykjavik, Glitnir, Depression, Kreppa, Kaupthing, Landsbanki, Icesave, Madoff, Hard Times

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