A couple years ago, perusing Google Analytics in a fit of
procrastination self-improvement, I noticed I had a single reader in Iceland. I wondered, in the following day’s entry, if it was a real person or a robo-server checking in from Reykjavik. I’ve always had a fascination with Iceland, and once seriously considered taking a two-week solo vacation there, touring the volcanic plains on Icelandic ponies. It never happened, but I still think that if I’m ever fit enough to travel 25 miles per day by horseback at a brisk tolt, and at peace with three meals a day of mutton, I’m gonna do it, just you wait.
The following day I received a note from a man with the initials H.K., announcing himself as my regular reader in Iceland. Signs and wonders of the internet age.
Anyway, I mentioned Iceland again yesterday, linking to Michael Lewis’ marvelous dissection of the financial meltdown there, in Vanity Fair, which you should read, because it is one interesting piece of journalism. This choice passage sums it up nicely:
(A) hedge-fund manager explained Icelandic banking to me this way: You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets.
It was almost that simple. And crazy.
Anyway, what did I find in my e-mail yesterday but another note from H.K., still reading us after all these years. He asks that I not use his full name, because there are only 300,000 Icelanders and everyone knows everybody else. His account of how the financial crisis played out there is so interesting I think it deserves wider distribution. And so:
As a long time reader and (maybe) still your only Icelandic reader I feel the need to send you a e-mail every time you mention Iceland on your blog. Searching for the last (and first) letter I wrote to you and seeing that it was from the spring of 2007 made me almost miss those golden days at the height of the madness back home in Iceland. I say almost because although everybody was spending money and trying to make themselves believe that they were happy, things were truly fucked up.
The overwhelming sense of greed and spending-ism (you have to make up words to describe this) was incredible but I never seemed to fit into this and just go along for the ride. I say “back home” because I fled the collapse and moved to Denmark last January. I was incredibly lucky and got a job here in my profession and hopefully I can ride out the meltdown here.
Although the global recession is also in Denmark its scale is nothing compared to Iceland. The article you link has a certain “reporting from the bar at the Hanoi Hilton” feel to it when read by a local like me. The journalist keeps getting these incredible quotes from the man on the street that underscore his story perfectly and he also gets some pretty big things wrong.
For example, there would (not) be an expensive car on the streets of Reykjavik now for example if the insurance companies were still paying out the burned ones. [Ed: Lewis describes nightly car fires of Range Rovers and other pricey models, torched by owners who can no longer keep up with payments.] With the insurance companies being no dummies, now you just get a similar used car instead of a payout and you still owe your car loan. With that being said the article is 90% true. But while it tries to describe the hedonism, arrogance and everything else that came with these nouveau rich masters of the universe types, nothing can come close to it. It’s like trying to describe an orgy to Sunday school children, you just had to be there. The bankers, journalists, government, unions and various others feasting on all the money that just seemed to come from the heavens.
I would like to tell my little story from the madness that was Iceland:
While I count myself one of the lucky ones, being young, educated and without family so that I can easily move, I’m still technically bankrupt. I (30 years old) and most people between 20 and 40 are saddled with massive mortgages and/or car loans that just keep getting bigger and bigger.
So while I drove an old car, didn’t buy big splashy things, never spent more that I earned and did my best to ignore the madness around me, I made the fatal mistake of wanting to live in my own apartment. I bought the apartment in 2007 and now 18 months later the mortgage has grown by 30% while the value has droppd by about 40%. In Iceland there were two kinds of mortgages, foreign currency-based or local currency tied to inflation. When the Icelandic krona fell last year the foreign based loans doubled while the krona loans (like mine) have just been simmering under a 15-17% inflation. Since my mortgage has an interest rate of 5.8% it increased by 22% last year and the increase will probably be close to 25% this year. My choices are either to declare bankruptcy or hope that I’ll be dept free by 45. (This by the way is a great conversation starter with the ladies here.)
But as I said, I’m one of the lucky ones. I love living here in Copenhagen and I haven’t been so happy in years. Without this recession I would never have dared to move out my comfort zone back home and now I live in a big global city and have a great job (which I hopefully will not get laid off from).
File that one under So You Think You’ve Got It Tough.
Here’s a passage from the Lewis article that stayed with me:
Here is yet another way in which Iceland echoed the American model: all sorts of people, none of them Icelandic, tried to tell them they had a problem. In early 2006, for instance, an analyst named Lars Christensen and three of his colleagues at Denmark’s biggest bank, Danske Bank, wrote a report that said Iceland’s financial system was growing at a mad pace, and was on a collision course with disaster. “We actually wrote the report because we were worried our clients were getting too interested in Iceland,” he tells me. “Iceland was the most extreme of everything.” Christensen then flew to Iceland and gave a speech to reinforce his point, only to be greeted with anger. “The Icelandic banks took it personally,” he says. “We were being threatened with lawsuits. I was told, ‘You’re Danish, and you are angry with Iceland because Iceland is doing so well.’ Basically it all had to do with what happened in 1944,” when Iceland declared its independence from Denmark. “The reaction wasn’t ‘These guys might be right.’ It was ‘No! It’s a conspiracy. They have bad motives.’” The Danish were just jealous!
The Danske Bank report alerted hedge funds in London to an opportunity: shorting Iceland.
I guess you can’t really fault the Danes; they tried to deliver the message. But when the message was ignored, they did what investors do: Positioned themselves to profit. You knew durn well I was a snake before you brought me in.
A wee bit of bloggage:
I don’t know if you non-subscribers can read this WSJ story, but here’s hoping. And here’s the nut graf:
Marketers, politicians and consumers like to imagine a world of solar panels, wind turbines and cars fueled by wood chips. But none of that gadgetry packs the here-and-now punch of a decades-old option: plugging leaky homes with a caulk gun.
It’s like finding out your mother was right when she said to eat your vegetables.
People sometimes express amazement at the shenanigans of the Detroit City Council. No way do members show up in tiaras, call one another “Shrek” and play not the race card, but the whole race deck, you might think. Well, you’d be wrong:
On a dizzying day that ended with the threat of a court fight to block the regionalization plan, Councilwoman Barbara-Rose Collins launched into a tirade Thursday. She lambasted the media and suburban officials, said council members have been called “crazy, stupid monkeys in a zoo” and said the deal follows a history of European settlers who pillaged, raped and slaughtered indigenous people.
The 17-minute speech was capped by cheers and ended with Collins leading the council and 40 spectators in the song “Onward, Christian Soldiers.”
And there’s video!
Finally, Lance Mannion delivers a writing lesson. Beautifully.
So here it is Friday, and we’re having some unseasonable warmth — in the low 50s already, headed another 10 degrees higher. All this talk of the northern latitudes has me thinking of midnight suns and the necessity of enjoying gifts like this while they last. So adieu for the weekend, and let’s hope for a little bit of springtime, for H.K. in Copenhagen and all the rest of us.