Iceland: What It's Like to Live in a World Without Money
Paul Kedrosky
About this author:
A must-read piece in weekend FT by a writer in Iceland. It is wonderfully written, specific, and filled with context on what it is like to live in a first-world country teetering at the edge of solvency, and without access to trade/currency.
A drive across town later that afternoon, October 6, at first gave grounds for comfort. The roads were as full as usual for the Reykjavik rush-hour – a half-hour build-up of traffic. Aircraft flew in and out of the downtown airport, students made their way home from schools and universities – note the plural – while visitors went to hospitals and fitness fiends to sports clubs. Reykjavik showed all the outward appearances of carrying on.
But a different picture began to emerge from the hourly news bulletins on the car radio. The Icelandic krona’s freeze in the capital markets had now spilled over into the day-to-day transactions of Icelanders abroad. Holidaymakers and business travellers venturing “til Útlanda”, as it is called, found their credit cards refused, and those wishing to buy foreign currency could not find willing sellers, aside from one or two who limited their purchases to €200.
Read the whole thing.
Related Articles
|
Top Rated Comment Streams:
-
1.Hedged In662
- 2.
-
3.Smarty_Pants390
-
4.cos1000288
-
5.axelrod608280
- Free E-Newsletters
This article has 20 comments:
-
bold4gold
-
43 Comments
My Website
Nov 15 08:44 AM-
investor88
-
732 Comments
Nov 15 09:23 AM-
Drew Horn
-
19 Comments
Nov 15 10:20 AMIt is wrong to allow a few people to gamble with a nations savings without the depositors knowing the actual risks. If Icelanders had such a gauge to measure the risk reward ratio for their deposits, natural caution would have prevented the abuses by their banks.
I am all for speculation by people who know that they are doing it. The role government should play is not to end speculation but to shine light on it!
-
collapse
-
5 Comments
Nov 15 10:47 AM-
dixie
-
46 Comments
Nov 15 11:00 AMIt is equally wrong for the clowns in Congress and the White House to gamble with our nation's $700 billion and more of savings, especially when they are clueless as to how to rectify the financial problems.
-
Perception
-
9 Comments
Nov 15 11:59 AMIt is equally wrong for the clowns in Congress and the White House to gamble with our nation's $700 billion and more of savings
wait, wut? our nation's $700 billion and more of savings? are you for real?
the government has no savings. it is just more debt. what they are gambling with is the solvency of our nation. imagine the icelandic situation played out with the us dollar. when the "full faith and credit" of the us government loses its intrinsic worth and meaning, the same may happpen to americans.
-
mollytjm
-
323 Comments
Nov 15 01:05 PM-
User 10755
-
70 Comments
My Website
Nov 15 03:00 PM-
User 10755
-
70 Comments
My Website
Nov 15 03:01 PM-
css1971
-
52 Comments
My Website
Nov 15 04:20 PMWhat is needed is debt free money; banking reform.
Take a look at Wörgl and the ideas of Silvio Gesell.
-
notsosmart
-
1241 Comments
Nov 15 04:37 PM-
otbricki
-
133 Comments
Nov 15 04:56 PM-
occdude
-
12 Comments
Nov 15 06:46 PMNow Iceland is having a hard time. Have they actually done an assessment of what they produce for all the goods the world gives them? They have Cod and geothermal steam (we can use the former but not the latter) and thats it! Couple that with derivative financing and they produce SQUAT!! They like the rest of G7 (esp. US) are a bunch of unproductive, slovenly, amoral, relativistic, snobby, self-absorbed and silly people that need a DIVINE rear end paddling.
Meanwhile in China they have brown plumes of toxic gas that they have to deal with because we want our Starbucks cups and are too lazy to produce them ourselves which would spread the pollution around making it less toxic or possibly making them prohibitive to make in the first place. But we and our "fiat carrot" are pulling off the swindle of the century convincing the Chinese to kill themselves for a promise to give them equal goods in kind at a latter date, it would be amusing if it weren't so tragic.
Iceland is just the prelude to a G7 financial meltdown that is gonna put an exclamation mark on my previous statements. All these "activities" we call productive work are just narcissistic reinforcements for a lifestyle that avoids the "dirty work" others are doing to prop up this delusional economy. The G7 is going to be the next Iceland so keep your eyes on them because that is our future.
-
sundrenched
-
26 Comments
Nov 15 09:07 PMA word to explain why I call them "greedy depositors" (and not victims). In my home country of Belgium, Kaupthing was until recently offering 6% on savings accounts, when no other bank went over 4%. People who moved their money to new-kid-on-the-block Kaupthing should have been aware that they were taking on a greater risk.
-
xsuddensam
-
242 Comments
Nov 15 09:36 PMToday's Iceland epitomizes financial fraud spurred on by outragious greed of a few men.
I am afraid that there's a good chance that we are headed down the same tragic path.
-
standfast77
-
8 Comments
Nov 16 08:37 AM-
BelaOthello
-
7 Comments
Nov 16 01:01 PMAre you kidding? Do you actually believe the garbage that you left on this website like below? Try thinking are asking for some help with this excercise before writing senseless attacks on countries and their people.
Google, the Yen Carry trade and then maybe you can begin to understand how the government of Iceland who participated in over leveraged bets in a trillion dollar trade like the rest of the world was able to go bankrupt and it had nothing to do with what they produced or didn't produce.
In fact, it was the G7's remark to isolate Japan and devalue its Yen around Oct. 28 that sparked the 900pt rally in the Dow the following day.
This entire "crisis" has been about the trillions of unreported dollars involved in the Yen Carry trade and the global margin call which created the snowball effect of every single asset being sold at the same time. Why else would gold (a safe haven) have it's largest monthly drop in over 25 years last month, yet the price of actual bars and coins and physical gold went up? hmmm Maybe because central banks from several emerging countries and our very own were selling their gold futures contracts at fire sale prices. Just like the Russians and Middle East were selling oil to meet their margin calls.
In other words, think a little deeper before proving to the world that you have no idea what you are talking about and especially before you start slamming entire countries and the people who live in them. Not to mention when one of the countries is your very own that gave you the free speech to say such things. You should be embarrased.
occdude 8 Comments Nov 15 06:46 PM
Now Iceland is having a hard time. Have they actually done an assessment of what they produce for all the goods the world gives them? They have Cod and geothermal steam (we can use the former but not the latter) and thats it! Couple that with derivative financing and they produce SQUAT!! They like the rest of G7 (esp. US) are a bunch of unproductive, slovenly, amoral, relativistic, snobby, self-absorbed and silly people that need a DIVINE rear end paddling.
-
Rob Viglione
-
60 Comments
My Website
Nov 16 03:12 PMLessons to be learned: leverage has its pitfalls and should be used in circumspect fashion.
I am nervous that America is failing to understand the develeraging process unfolding globally. Increasing leverage at this point can lead to disaster, yet instead of attempting to cure the borrow-spend disease, the U.S. government is attempting to perpetuate it.
-
derryl
-
134 Comments
Nov 17 12:15 AMMaybe we deserve it. (I know many of you have been prudent and this doesn't apply to you, but I'm speaking generally about the attitudes that cause these problems) We all get caught up in irrational exuberance that creates bubbles and boy we like those bubbles! When we're feeling rich we shout down any voices of caution then when the crash comes we cast around for who to blame.
But it was us who did it. We all participated and enjoyed watching the values of our stocks and real estate skyrocketing. Exuberant bankers joined in the party and lent us more money to buy into the growing bubbles. Bank stockholders would not accept minimal returns when everyone else appeared to be getting rich so even the prudent were overruled. It was one helluva ride.
As long as we behave like kids on a rollercoaster squealing with glee as it climbs up and squealing with horror as it plummets down, there will be people claiming to be sober minded adults who believe they have to protect us from our childish stupidity. They will rule us.
Democratic citizens are supposed to take responsibility for ourselves but since the New Deal we have surrendered our independence for "security". There is no security. It's a childish fantasy, believing in some mighty father/government who will save us from ourselves.
The only security we have is our ability to earn a living tomorrow. Sometimes it will be hard and we will be poor, but that's life. Try getting elected by telling people this. You get elected by telling people how well you will take care of them, not how free you will make them. Entitlement is the fatal disease of democracies.
A nation's money is an essential institution and a nation's commercial banks are the essential gatekeepers of that institution. America's commercial bankers were bullied into making subprime loans that they immediately sold off to Fannie and Freddie who immediately packaged them and handed them to Wall St brokers to flog as "investments"...
Government housing policy made this all possible because commercial bankers would never have lent all that money to uncreditworthy borrowers if they had to take the risks themselves. Some might have swung for the fences and crashed like Iceland and good riddance to them. Most would have been much more cautious.
Banks are still lending, but they're back to performing their gatekeeper role by only lending to people who will be able to repay their loans. In a falling economy already overloaded with debt there just aren't that many creditworthy borrowers around so lending volumes are down.
In previous engineered financial shocks commercial banks were made to look imprudent and thousands of them were banished into insolvency to consolidate control of banking and money. I know this sounds like a conspiracy theory and maybe it is, but the history clearly shows an inexorable push in this direction.
I am defending commercial bankers because most of them are just businessmen like you and me, competing in our industry in a more or less free market environment (I'm in construction; I'm not a banker). If the government offers us ways to vastly increase our profits we will do it. It's stupid not to, even if we think it's not "right". There are rewards for going along with the program and punishments for sitting it out and most of us don't have the means to resist this even if we wanted to.
Banks don't "have to" fail. The decision in the US is made by the Comptroller of the Currency. Asset/capital ratios can be relaxed if there is systemic decline in bank capital as happened when bank stocks declined along with the rest of the market. Central Bank cash deposit requirements can also be relaxed. Canada's Superintendent of Financial Institutions recently relaxed capitalization ratios and mark-to-market requirements on assets that are held long term. These are easy and readily available ways to help your banks through meltdowns and save your commercial banking system that we all need if we want to maintain a functioning economy.
I have a little book titled, "Financial Ignorance: The Achilles Heel of the Conservative Movement". If you don't understand how modern money works you have no hope of understanding how to fix the present problems. Nobody just assumes they are a brain surgeon just because we all use our brain, but everybody assumes they understand how to fix money just because they use money.
Federal deficits can and should be monetized. Google Warren Mosler and read his "Soft Currency Economics" online. Fiat money and central banking offer all the tools a nation needs to properly regulate the nation's financial life. These tools are perfectly suited to democratic control. We don't need rulers. But if we're not careful that's exactly what we're going to get.
-
De Graaf
-
59 Comments
Jan 04 10:48 AM" They have Cod and geothermal steam (we can use the former but not the latter) and thats it! "
I say to that; At least the Icelanders have geothermal (green) energy and keeping it warm instead of the oil-thirsty US citizens. The size of the US is going to drag it down with oil up at the top.
You Americans must clap your hands, that oil remains low this year. Try demonstrating against Israel's surges in the Middle East. If that crisis evolves into another war with Lebanon and Hezbollah, you can expect a rise in oil and a bigger hole in your wallet OCCdude.