Saturday, March 7, 2009

Chronicling the collapse of Iceland: Which stage is your country in?

I came across an informative and very entertaining article about Iceland in the Vanity Fair, so I thought this would be an opportune time to compile some of the news regarding their economic collapse that I have bookmarked in the last few months.

The reason that Iceland is extremely important is because it was the model to which all Western nations were told to endeavor towards. If you recall, in 2008 Iceland took the top spot on the Human Development Index (HDI) compiled on the basis of data from 2006, an index used to rank countries by level of human development".

SThe HDI combines normalized measures of life expectancy, literacy, educational attainment, and GDP per capita for countries worldwide. It is claimed as a standard means of measuring human developmenta concept that, according to the United Nations Development Program (UNDP), refers to the process of widening the options of persons, giving them greater opportunities for education, health care, income, employment, etc. The basic use of HDI is to measure a country's development.

Iceland was the bellwether nation less than two years ago, but has now completely collapsed. Considering that many other countries conducted themselves in the same fiscally irresponsible manner, it would be safe to assume that many other Western nations will, to some degree, also fail.

It"s worth while to note that the term bellwether is Sderived from the Middle English bellewether and refers to the practice of placing a bell around the neck of a castrated ram leading its flock of sheep. I wonder how many other countries will also be economically castrated?

Below you will find some news and videos from the last year chronicling the collapse of Iceland:

  1. 18 May 2008: No wonder Iceland has the happiest people on earth - SHighest birth rate in Europe + highest divorce rate + highest percentage of women working outside the home = the best country in the world in which to live. There has to be something wrong with this equation. Put those three factors together - loads of children, broken homes, absent mothers - and what you have, surely, is a recipe for misery and social chaos. But no. Iceland, the block of sub-Arctic lava to which these statistics apply, tops the latest table of the United Nations Development Programme's (UNDP) Human Development Index rankings, meaning that as a society and as an economy - in terms of wealth, health and education - they are champions of the world. To which one might respond: Yes, but - what with the dark winters and the far from tropical summers - are Icelanders happy? Actually, in so far as one can reliably measure such things, they are. According to a seemingly serious academic study reported in the Guardian in 2006, Icelanders are the happiest people on earth. (The study was lent some credibility by the finding that the Russians were the most unhappy.)
  2. 7 October 2008: Iceland crown surges on news of Russian loan - SIceland's crown currency surged after news on Tuesday that Russia would give the country 4 billion euros in loans to help it through a financial crisis that threatened to overwhelm the national economy. The Icelandic crown had dropped 35 percent earlier on the news the state was taking over the country's second-biggest bank. But it staged a huge recovery to 220 per euro after Iceland's central bank said in a statement that Russia had agreed to lend the money.
  3. 7 October 2008: Icesave Suspend Access to UK Customers' Savings Accounts - SIcesave is no longer allowing customers to withdraw funds - as ministers in Reykjavic, Iceland, rush to shore up the nation's financial services system. The Icelandic government has attempted to calm savers, worried that the nation's economy might be in meltdown. Speaking on TV yesterday, Icelandic prime minister Geir Haarde said that the government was to offer a 100 percent guarantee for all domestic bank customers' savings - and that the financial regulator was to be given greater powers to intervene in the financial firms' affairs. Earlier, trading in the nation's banks was suspended.
  4. 9 October 2008: U.K. Used Anti-Terrorism Law to Seize Icelandic Bank Assets - SChancellor of the Exchequer Alistair Darling used anti-terrorism rules to take control of assets held in Britain by a troubled Icelandic bank. Darling stepped in to protect deposits made by U.K. residents in Reykjavik-based Landsbanki Islands hf, which the government of Iceland seized yesterday. About 300,000 U.K. account holders held deposits at Landsbanki's Internet bank, Icesave.
  5. 9 October 2008: Iceland suspends share trades as Kaupthing is nationalised - SIceland's stock exchange has suspended trading in all shares because of "unusual market conditions" after the country's largest bank Kaupthing was nationalised. While the chairman of Kaupthing Sigurdur Einarsson blamed the Icelandic government for ruining the island's entire financial system after his bank became the third to be taken over by the state in three days. But local businessman Jon Jonsson said: All the people are very angry with the billionaires for living the high life, with women, Hollywood celebrities and socialising with Roman Abramovich, while they got the banks into this debt." During the global credit boom its banks expanded overseas, lending large amounts to leading businessmen. The country's banking assets amounted to about nine times its gross domestic product and its current account deficit has billowed to 16pc of GDP last year.
  6. 12 October 2008: Bank crunch 'may hit council pay' - SFears are growing that some local government workers may not be paid this month, because councils have payroll tied up in failed Icelandic banks. Council leaders are understood to have asked the government to help tide them over the current financial crisis. About 100 councils in England, Scotland and Wales have deposits in collapsed Icelandic banks worth 842.5m. Council leaders are to meet the Icelandic ambassador next week to seek assurances over their investments.
  7. Blog that began October 2008: Icelandic News in English - SHere you will find Icelandic news translated to English. I lost my job at the end of October as a result of the depression so, for now, I consider my job to be translating Icelandic news for those of you who are interested in this crisis that is shaking the very foundations of the Icelandic society.
  8. 8 November 2008: Stunned Icelanders Struggle After Economy"s Fall - SThe collapse came so fast it seemed unreal, impossible. One woman here compared it to being hit by a train. Another said she felt as if she were watching it through a window. Another said, It feels like you"ve been put in a prison, and you don"t know what you did wrong." This country, as modern and sophisticated as it is geographically isolated, still seems to be in shock. But if the events of last month the failure of Iceland"s banks; the plummeting of its currency; the first wave of layoffs; the loss of reputation abroad felt like a bad dream, Iceland has now awakened to find that it is all coming true. It is not as if Reykjavik, where about two-thirds of the country"s 300,000 people live, is filled with bread lines or homeless shanties or looters smashing store windows. But this city, until recently the center of one of the world"s fastest economic booms, is now the unhappy site of one of its great crashes. It is impossible to meet anyone here who has not been profoundly affected by the financial crisis.

  9. 22 November 2008: Britain is in no position to laugh at Iceland"s problems - SIs Britain simply a bigger version of Iceland? Certainly the City of London is starting to look a bit too much like Reykjavik, but with taller buildings and fewer cod. It is an exaggeration, but not that much of an exaggeration, to liken the UK to the broken, bankrupt North Atlantic island. Like Iceland, we boast a huge banking industry out of all proportion to the overall economy. Like Iceland, we have an unfunded depositor lifeboat scheme totally unequipped to grapple with failing banks. Like Iceland, our national output is dwarfed by the vast liabilities of our banks. Like Iceland, our banks for years scoffed at relying on domestic depositors to fund their activities and developed a dangerous addiction to wholesale money. Like Iceland, our Government is poised to go on a borrowing spree to try to soften the pain. Like Iceland, our currency is on the skids as foreign investors pull out.
  10. 23 November 2008: Iceland protest ends in clashes - SProtesters in Iceland's capital Reykjavik have clashed with police during a demonstration over the handling of the financial crisis. Several hundred protesters gathered outside the city's main police station to demand the release of a man jailed in a previous demonstration. Five people were injured when police used pepper spray to disperse the group after some tried to storm the building. Iceland faces a sharply contracting economy over the financial collapse.

  11. 26 November 2008: Iceland inflation soars to 17.1% - SThe annual rate of inflation in Iceland has escalated to a record high of 17.1% as the country battles the worst financial crisis in its history. The Icelandic statistics agency said prices rose in November alone by 1.74% compared to the previous month. Food prices increased fastest, up 30.6% over the year, as the country's currency plummeted. The agency warned that inflation rate could rise beyond 20% in the future, threatening the economy.

    SAt its last meeting, at the beginning of November, the Icelandic central bank left interest rates unchanged at 18%, the highest level in Europe, in an effort to fight inflation. Prices of imported goods have risen fast after the local currency, the Icelandic krona, plunged amid global financial turmoil. The International Monetary Fund (IMF) has recently approved a $2.1bn (1.4bn) loan for Iceland, after the country's banking system collapsed in October. Iceland's government seized control of all three of the nation's major banks in a bid to keep the country's financial system afloat.

  12. 1 December 2008: Icelanders protest economic meltdown - SThousands of Icelanders marked the 90th anniversary of their nation's sovereignty with angry protest Monday, and several hundred stormed the central bank to demand the ouster of bankers they blame for the country's spectacular economic meltdown.

  13. 25 January 2009: Iceland's senior minister resigns as government becomes first global political casualty of the credit crunch - SIceland's Minister of Commerce Bjorgvin Sigurdsson has resigned, two days after the prime minister announced his own departure due to pressures from the island nation's economic collapse. Mr Sigurdsson, a member of Iceland's junior Social Democrat coalition party, made the announcment at a news conference this morning. 'I have decided to do this to take responsibility,' he said. Prime Minister Geir Haarde shocked the country on Friday when he said he would not seek re-election and called for a general election on May 9.
  14. April 2009 issue of Vanity Fair: Wall Street on the Tundra - SIceland"s de facto bankruptcyits currency (the krona) is kaput, its debt is 850 percent of G.D.P., its people are hoarding food and cash and blowing up their new Range Rovers for the insuranceresulted from a stunning collective madness. What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power? In Reykjavk, where men are men, and the women seem to have completely given up on them, the author follows the peculiarly Icelandic logic behind the meltdown.


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