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Wednesday, November 19, 2008

Whither Iceland? (UPDATE)

We in America are in tough straits economically. Unemployment is growing. Credit is next to impossible to obtain. The domestic auto industry stands outside our homes with a hat out for change. My generation has never seen our fiscal security look so bleak. But we at Shambollocks are always keen to look at the bright side of things.

We're not Icelanders.

The country of Iceland is bankrupt. Yes, the entire country. Last month, citizens were unable to use their credit cards. Icelanders on holiday found themselves stranded, with no bank willing to exchange their currency. Their stores sat bare, as they fought to even achieve the bare minimal goal of feeding themselves.

How does a Western economy find itself completely broke? The Financial Times over the weekend had a great account on what life is like in Bjork Country.

Picture a pig trying to balance on a mouse’s back and you’ll get some idea of the scale of the problem. In a mere seven years since bank deregulation and privatisation, Iceland’s financial institutions had managed to rack up $75bn of foreign debt. In his address to the nation, Haarde put the problem in perspective by referring to the $700bn financial rescue package in America: “The huge measures introduced by the US authorities to rescue their banking system represent just under 5 per cent of the US GDP. The total economic debt of the Icelandic banks, however, is many times the GDP of Iceland.”

And here is the nub. Iceland’s banks borrowed more than $250,000 for every man, woman and child in Iceland, and placed an impossible burden on the modest reserves of the central bank in the event of default. And default they have.

OK, so things most definitely could be worse for all of us. We are still looking for a leader to emerge from our economic struggle, but at least we can still buy food. In fact, at this very moment I have a casserole almost done which smells delicious. I plan to dig in and give thanks that as bad as everything is right now, I know tomorrow will be better. And I'm sure that will hold true for the industrious Icelandic people.

But just in case, next Sigur Ros show you attend, bring some canned goods. They may need it.

- UPDATE: On Sunday, protests broke out in Iceland over the arrest of a protester. They eventually degraded into a clash with police. Cue the Stones' 'Street Fighting Man'.

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