I think the Irish are starting to wonder why then have a deal to pay off thier bank bail out debts at 6% when Iceland has been offered 3%, along with Estonia and Latvia...I think the Greeks are not happy with their deal either.
Maybe all the defaulting countries will band together and get a better deal via collective bargaining. I dunno. Like a Union I guess...
Its really not a good bargain...first the risk of banking default fell on the depositors...this lead to the development of larger super capitalized banks that larger depositors felt safe in...then the larger well capitalized banks began to back the credit of their smaller less well capitalized banks...and so they both grew, but the larger banks became exposed to the failures of the smaller banks...then the larger banks made a syndicate of the larger banks to back up the credit of the largest banks....but through the use of the syndicate in crises this consolidated power in just a couple of the largest banks...then the government decided to replace the syndicate and prevent the power being consolidated in the largest banks and it formed its own largest bank...then the governmetn largest bank began to guarantee the deposits of all the other banks...when the government quaranteed the deposits of all the other banks then the private largest banks lost thier competitive advantage...so the largest private banks decided to expand into new credit businesses and they did not try to remain super capitalized...becuase thier deposits were guaranteed...the the government bank decided that the no longer well capitalized banks could not be allowed to fail and so bought preferred shares in the largest banks when they got into trouble....then the government began to guarantee more and more deposits of all the banks...and the government started guarantee the real estate loans of all the banks...so the banks started to write more liberal real estate loans becuase they would not have to own them...then when the real estate loans went bad and the foreign loans went bad the governemnt began to guaratee all the deposits of all the banks and the government began to buy all the bad debt of all the banks and the government began to lend money to all the banks and to buy preferred stock in the all banks...the government took on all the risk of the banks...then the government started to have trouble with its own debts....so the Super Government guaranteed the debt of the smaller government which had guaranteed the debt of the large banks and the real estate loans, who had guaranteed the debt of the small banks and all thier depositors and bond investors....Then the super government having trouble raising more an more debt to guarantee more and more debt tuned to the IMF to guarantee all of its debts to all if its creditors and all of its governements and all of its banks...and in the end there was no more money than there was at the beginning...but a lot more debt...they said the snake had swallowed its own tail.
your view on Iceland are like your views on deflation. there is a disconnect from reality. the most likely effect on Iceland is on an application of Iceland to join the EU. anyway who needs those greeks and italians boning their blonde women once they join the EU and have free migration? Iceland economy is doing quite well. Icelandic krona exchange rates reflect recovery of national economy Posted on27 March 2011. Tags: currency, economy, forex, Iceland, krona, trade Written by Tom Cleveland, foreign exchange market analyst: While the major foreign exchange event of the past decade would surely be the highly successful introduction of the euro, many may have overlooked the results of the more northern âcrownâ currencies, those belonging to Scandinavian countries and the Republic of Iceland. Each has tracked well with the success of the euro, but disruption and divergence marked the paths of these currencies following the global economic downturn in 2008. Iceland, hit especially hard, imposed modified currency controls, to prevent the immediate withdrawal of foreign currency investment monies, but conditions are appearing favourable enough to consider their gradual termination at present. The national currency, the Icelandic krona (âISKâ), still floats in the Forex market, but economists believe that if present controls were removed too soon, then the current scenario of an appreciating national currency and recovering economy could be placed in jeopardy. The five-year history of relationships to the Euro and the U.S. Dollar tell the story of Iceland quite well as shown below: For the first five years of the new millennium, the krona followed the euroâs gradual appreciation as the success of its introduction began to take hold in the forex market. Depreciation of the currency then overtook the headlines, as the worst recession in the past eighty years swept the globe. A major banking crisis of monstrous proportions swept over Iceland and its progressive economy, exacerbated by what is generally referred to as the âcarry tradeâ. The Monetary Policy Committee, the âMPCâ, installed modified currency exchange controls on various investment securities to prevent a wholesale diminution of the krona from occurring. The krona has appreciated versus the euro and the US dollar over the past year. However, central bank and government officials have hopefully learned a few lessons from its national banking collapse that has been termed, relative to the size of its economy, the largest banking failure to befall a single country in economi Read more: http://www.icenews.is/index.php/201...t-recovery-of-national-economy/#ixzz1J7x5cedb
Iceland's Banks Come in From the Cold Europe's bailout path has diverted resources to failing enterprises, postponing and deepening the problem. By ÃSGEIR JÃNSSON Reykjavik Iceland's government last week raised $1 billion through an issue of five-year bonds at yields just above 3%. This successful return to private debt markets presents the best evidence yet that financiers approve of Reykjavik's handling of the financial crisis and think the country is on the road to recovery. Therein lies a lesson for the rest of Europe. Three years ago, Iceland forced its over-leveraged financial sector into a painful debt restructuring instead of bailing out its banks. The government had no other choice: Icelandic banks' assets totalled roughly 1,000% of GDP, and in the world's smallest currency area, no less. The central bank could not take on the role of lender of last resort without igniting a currency crisis. Critics dubbed this response disastrous, and Iceland served as the cautionary tale of an "Icarus economy" whose banks had grown too big to save. Today, though Iceland's banking system defaulted, its government remains solvent, with debt levels close to the European average of between 80% and 90% of GDP. Iceland's luck was that it did not qualify for a bailout. Since Iceland was not part of the European Union and the failure of its banking system wasn't sparking any "contagion" fears, no other major central banks were willing to lend to a hypothetical Icelandic bank-bailout scheme. When the government attempted on its own to take over one of the island's three banks, investors rushed to retrieve their funds, and in one week, Iceland's financial system was drained of liquidity. Alone and melting down financially, the government used emergency legislation to change course in the first week of October 2008. It divided each of the failed banks into two parts: a foreign bank that went into receivership, and a domestic bank whose deposit base Reykjavik guaranteed. In the process, Iceland's banking system shrunk by 80%. The move was smooth in the sense that households never lost access to their accounts, since their claims were prioritized over those of bondholders. But the division itself was a complicated affair, involving protracted negotiations over the "fair value" of the defaulted banks' assets as they were transferred to the new, post-crisis banks. In the end, creditors to the old banks wound up placing capital in the new banks, thus ensuring their stake in any potential upside from an economic recovery. The new banks now boast capitalizations in excess of 16% of all assets and are 90% funded with deposits. The transfer process also required them to book stiff precautionary write-offs, meaning their balance sheets have been thoroughly housecleaned. They should now be able to restructure both corporate and household debt, while still maintaining solvency. There may be no better contrast between restructuring versus bailouts than to compare Iceland to Ireland. Dublin faced the same predicament as Reykjavik in 2008, but it responded with a blanket guarantee that turned Irish taxpayers' money into collateral for Irish bank debts. Rating agencies and so-called experts hailed the move at the time, in part because Dublin had the euro and the mighty German state vouching for its credibility. But Iceland's experience of botched government takeovers and private-capital flight has also played out in Irelandâonly much more slowly and, arguably, more painfully. The crucial difference between Iceland and Ireland is that Icelandic taxpayers relinquished responsibility for their banks' bondholders, while their Irish counterparts are on the hook for their banks' crushing debts. Even worse, we may not have seen the full scale of the Irish banking system's losses, given that it remains on government life support. It is becoming clearer by the day that too many of Europe's banking crises were initially misdiagnosed as liquidity, rather than solvency, problems. For some countries, most notably Ireland, the policies prescribed for that misdiagnosis have transformed banking crises into sovereign-debt crises. Europe's bailout path has only diverted ever-more resources to failing enterprises, postponing and deepening the problem. Iceland's restructuring was both painful and costly for the population, but the government did not throw good money after bad, and the taxpayers were spared a nationalization of private debts. Is it any wonder that forward-looking financial markets are now betting on the Icelandic recovery? Mr. Jónsson is assistant professor of money and banking at the University of Iceland Iceland had the last laugh on you and debaser etc. who said send in the troops + this nonsense "Quote from Debaser82: They say no. People should know when they are conquered. Would you Quintus? Would I?" +this from fund junkie Quote from fundjunkie: And so if the Icelandic people won't pay it'll be the British people that pay, right, given that the Govt and the people are the same when it comes down to counting out the money. My point is that Iceland will pay a price, and a not insignificant one too, should it renege on what it agreed to. The tone of many of the comments in this thread has been that there will be no repurcussions worth worrying about. I think that's a naive point of view. cheers for naivete
I didn't forget,Visaria, that you got it right from the start. "Visaria Registered: Sep 2004 Posts: 1539 02-20-11 02:41 PM Good for them. Iceland should tell its creditors to f*** off. "
I'm impressed by Icekand's fortitude - they took a challenging path and appear to be making it work. There is a lesson there for the rest of us, but I dont think it can be heard above the idealogical saber-rattling.