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Iceland is begging for financial support from Russia...
Quote:
Iceland Teeters On Brink Of Bankruptcy REYKJAVIK, Iceland, Oct. 7, 2008
(AP) This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.
Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy - from fashion retailers to top soccer teams.
The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes - their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.
"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.
The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.
"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.
A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.
One of Iceland's biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers - including enough to make it the largest private company in Britain, where it owns a handful of stores such as the famous toy store Hamley's.
Kaupthing, Iceland's largest bank and one of those whose share trading was suspended last week to stop a huge sell-off, has also invested in European retail groups.
Thousands of Britons have accounts with Icesave, the online arm of Landsbanki that regulators said was likely to file for bankruptcy after it stopped permitting customers to withdraw money from their accounts Tuesday.
To try to wrest control of the spiraling situation, the government also loaned $680 million to Kaupthing to tide it over and said it was negotiating a $5.4 billion loan from Russia to shore up the nation's finances.
The speed of Iceland's downfall in the week since it announced it was nationalizing Glitnir bank, the country's third largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.
Famous for its cod fishing industry, geysers, moonscape and the Blue Lagoon, Iceland was the site of the Cold War showdown in which Bobby Fischer of the United States defeated Boris Spassky of the Soviet Union in 1972 for the world chess championship. Last year, Iceland won the U.N.'s "best country to live in" poll, with its residents deemed the most contented in the world.
No more.
Despite sunny skies Tuesday after three days of unseasonably cold weather, Reykjavik's mood remained grim - cafes were half-empty, real estate agents sat idle, and retailers reported few sales.
"I'm really starting to get worried now. Everything is bad news. I don't know what's happening," said retiree Helga Jonsdottir as she headed to a supermarket.
Icelanders are also beginning to question how a relative few were able to generate the disproportionate wealth - and associated debt - that Haarde has warned puts the entire country at risk of bankruptcy.
Iceland's reinvention from the poor cousin in Europe to one of the region's wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s.
Those free market reforms turned Iceland from a conservative, inward-looking country to one of a new generation of internationally educated young businessmen and women who were determined to give Iceland a modern profile far beyond its fishing base.
Entrepreneurs become its greatest export, as banks and companies marched across Europe and their acquisition wallets were filled by a stock market boom and a well-funded pension system. Among the purchases were the iconic Hamley's toy store and the West Ham soccer team.
Back home, the average family's wealth soared 45 percent in half a decade and gross domestic product rose at around 5 percent a year.
But the whole system was built on a shaky foundation of foreign debt.
The country's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion.
Those external liabilities mean the private sector has had great difficulty financing its debts, such as the more than $5.25 billion racked up by Kaupthing in five years to help fund British deals.
Iceland is unique "because the sheer size of its financial sector puts it in a vulnerable situation, and its currency has always been seen as a high risk and high yield," said Venla Sipila, a senior economist at Global Insight in London.
The krona is suffering in part from a withdrawal by a falloff in what are called carry trades - where investors borrow cheaply in a country with low rates, such as Japan, and invest in a country where returns, and often risks, are higher.
After watching the free-fall for several days, the Central Bank of Iceland stepped in Tuesday to fix the exchange rate of the currency at 175 - a level equal to 131 krona against the euro.
Haarde said he believed the measures had renewed confidence in the system. He also was critical of the lack of an Europe-wide response to the crisis, saying Iceland had been forced to adopt an "every-country-for-itself" mentality.
He acknowledged that Iceland's financial reputation was likely to suffer from both the crisis and the response despite strong fundamentals such as the fishing industry and clean and renewable energy resources.
As regular Icelanders begin to blame the government and market regulators, Haarde said the banks had been "victims of external circumstances."
Richard Portes of the London Business School agreed, noting the banks were well-capitalized and had not bought any of the toxic debt that has brought down banks elsewhere.
"I believe it is absolutely wrong to say these banks were reckless," said. "Quite the contrary. They were hugely unlucky."
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Hmmmm. The demon that is known as deregulation rears its ugly head in Iceland. Fun country to visit. Gotta love those outdoor spas in the winter. Naked people and Vodka.
__________________
In politics, nothing happens by accident. If it happens, you can bet it was planned that way.
Franklin D. Roosevelt
"The moment you think you got it figured...you're wrong." Mr. Rate
They should seek advice from Palin. She has had her own bank account for sometime. She also has lots of experience with ice AND land from living in Alaska.
They should seek advice from Palin. She has had her own bank account for sometime. She also has lots of experience with ice AND land from living in Alaska.
sorry couldn't resist.
nevermind.
You are cheeky..... and clever.
__________________
In politics, nothing happens by accident. If it happens, you can bet it was planned that way.
Franklin D. Roosevelt
"The moment you think you got it figured...you're wrong." Mr. Rate
Hmmmm. The demon that is known as deregulation rears its ugly head in Iceland. Fun country to visit. Gotta love those outdoor spas in the winter. Naked people and Vodka.
Gonna be even better tourist destination when their currency drops in value to the 1980's version of the peso.
(________) are also beginning to question how a relative few were able to generate the disproportionate wealth - and associated debt - that (_____) has warned puts the entire country at risk of bankruptcy.
__________________ Hoping for Audacity
Well, in truth I'm actually not a total hawk, but I'm not a dove either -- I'm more like an angry pigeon flying over the political arena after a really big meal. -Abba Gav
Maitre D: And finally, monsieur, a wafer-thin mint.
Mr Creosote: No.
Maitre D: Oh sir! It's only a tiny little thin one.
Mr Creosote: No. **** off - I'm full...
Maitre D: Oh sir... it's only wafer thin.
Mr Creosote: Look - I couldn't eat another thing. I'm absolutely stuffed. Bugger off.
Maitre D: Oh sir, just... just one...
Mr Creosote: Oh all right. Just one.
Maitre D: Just the one, sir... voila... bon appetit...
(Mr. Creosote swallows the mint and then blows up dramatically)
Maitre D: Thank you, sir, and now the check.
— Monty Python's The Meaning Of Life
Someone always takes it too far, but what happens when the planet does it?
Buckle up.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
Tip of the iceberg? I think we hit the iceberg. While up top they're insisting it's just a bad dent and we can pound out the hull and be ugly but limp in to port to get prettied up, below the waterline there's a big freakin' HOLE and we're taking on water faster than we can bail.
Conrad or someone -- want to tell the folks what happens to China when we stop shopping? We US consumers have been the hamsters that keep that thing going. and from there...
The Middle East is watching oil prices start to drop, and many of those nations are heavily invested in our financial sector, whoops, and some like the Saudis and Iranians have NO other means of sustaining the national economy. Russia closed both it's stock markets until Friday. The European Union nations are starting to glare at one another -- Iceland failing is going to hit Europe very hard.
A friend of mine says we're looking at 3-5 years before this fully shakes out, under the best case scenario. This is the whirlwind we have been sowing for a long time. I never got how the people who clamor most for decentralizing government were so happy with ever-more-concentrated corporate and financial power.
__________________ Hoping for Audacity
Well, in truth I'm actually not a total hawk, but I'm not a dove either -- I'm more like an angry pigeon flying over the political arena after a really big meal. -Abba Gav
Moon Lander Champion!
All Hell is breakin loose!!!!!
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