Bloggfærslur mánaðarins, mars 2009

Kreppa - Part 2

The Icelandic kronur is on the way down once again after seeing some improvement earlier this year. Gas and diesel prices have already gone up signaling the beginning of higher inflation.  This means higher food prices, higher mortgage payments and higher payments for companies and individuals with foreign currency loans.  That will bring more loan defaults and more bankruptcy.  The slide of the kronur was worsened by the lowering of the prime interest rate. Any savings seen now by the 1% decrease is about to be wiped out by the rise in inflation.  The Central Bank should no longer bow to political pressures and instead raise the prime rate to shore up the kronur.  The entire recovery in Iceland depends on a stronger kronur or the taking up of another currency.  Maybe the government will gain the political will to pursue another currency when every company is bankrupt and every house is owned by the housing fund. By then though it will be too late.

GTB Krónan lækkar enn
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Checked the Value of the Kronur Lately?

Gylfi Arnbjörnsson wants the Central bank to lower the prime interest rate.  He points to lower inflation as the reason to proceed with a bigger reduction in the rate. Unfortunately, the kronur is far from stable at this time and the high interest rates are exacty why the inflation rate is so low. Any greater change at this point could send the kronur down further, putting the many companies and individuals with foreign currency loans ever closer to bankruptcy.  Also most homeowners have inflation linked loans. They have seen the costs of ther loans reduced 5,1% due to the lowering of the inflation rate. The only reason to lower  rates would be to allow more credit into the system. Since the banks are basically bankrupt and are not yet fully recapitalized they don't have any money to lend anyway. So why lower the rate?  The savings seen by those with non-index linked loans is small compared to the savings seen by a stronger kronur and lower inflation rate.  Any lowering of the prime interest rate and Iceland could be headed back down the road it came from.

GTB Trúir ekki öðru en stýrivextir lækki umtalsvert
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Whole Foods- No Brains or Balls

I can do nothing but shake my head whenever I read bullshit like this coming from the land of hypocracy.   It kind of makes me want to shoot the fucking whales myself.  This Whole Foods crap is a  typical American response in dealing with the world.  The American way of life revolves so much around the God All Mighty Dollar that they think they can break the will of another country with what is nothing short of economic terrorism.  Reading all the blogs linked to this report, I am comforted that the actions taken by Whole Foods is only strenghtening the Icelanders' resolve.  And how fucking pussy-like was it to announce that Whole Foods will no longer promote Icelandic products.  Not "no longer sell" only "no longer promote".  Seems the management of Whole Foods lacks not only brains but also balls. Another typically American ploy- keep the 1% of the protesters happy with some bullshit propaganda that "looks" like they are tough while keeping the other 99% who actually buy Icelandic products and don't give a shit about whaling as long as the price is right, happy.  If the Americans stopped doing things based on money and did something, anything, based on principle, I think I would drop dead, right then and there, of shock.  Looks like I never have to worry about that happening anytime soon.


(Sorry about the expletives, but this fucking American hypocracy pisses me off. Now you know one reason why I don't live there anymore.)


GTB Hætta að kynna íslenskar vörur
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Chump Change

When you are already in debt to the tune of 11 trillion dollars, what's another couple of billion dollars anyway?


"There [is a measure] which if not taken we are undone...[It is] to cease borrowing money and to pay off the national debt. If this cannot be done without dismissing the army and putting the ships out of commission, haul them up high and dry and reduce the army to the lowest point at which it was ever established. There does not exist an engine so corruptive of the government and so demoralizing of the nation as a public debt. It will bring on us more ruin at home than all the enemies from abroad against whom this army and navy are to protect us." --Thomas Jefferson to Nathaniel Macon, 1821. Mun meiri fjárlagahalli
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Everything is Bigger in the US, Including the Debt

Obama is quite right when he says the US is not on the same path as Iceland.  When you get yourself into a hole the first thing you need to do is stop digging.  Iceland is in a hole, but it has also stopped digging. Not by choice, of course; Iceland actually had its shovels taken away. But at least the outcome is the same.  When one hits rock bottom one can always take comfort in the fact that the only way to go is up.  In the US they still have 536 people who can't seem to let go of the shovels and think the solution is to dig some more. 

 The US debt is now 11 trillion dollars.  To give an idea of how much that is- If the US paid the debt down 1 dollar a second it would take 348,808 years (yes, you read that right!) to pay off the debt.  The amount of the debt is staggering and yet they keep adding more to it.  The Social Security system is failing, the healthcare system is broke, the infrastruture is crumbling and the debt is just getting bigger. The US is definitely not headed the same way as Iceland. They are on a much worse course.

GTB Obama: Ekki sömu leið og Ísland
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Give it a Rest Already!

So now the famous unemployed writer Jonas Moody has thrown his hat into the ring and commented about the Vanity Fair article from Michael Lewis, defending the Icelanders from the evil scourge of fluff journalism.                                                                                                                                                       The problem is Moody doesn't really do a really good job of countering Lewis' "facts". Actually , I recognized right away that most of the so called factual observations were just Lewis trying to add a little humor to the story.  So to actually rebut them is like trying to tell a  comedian his "facts" are wrong in his monlogue.  Whats the point? But Jonas tries his best and ,well, his best wasn't good enough.  Some examples-

Lewis mentions people hoarding food, Moody says people didn't.  Well I don't know what island Moody is living on but in the beginning of the crisis, people hoarded food.  We all talked about it.  At work, at home.  The annual new years show made fun of it. 

Lewis talks of people blowing up their Range Rovers and says he hears  the "unsettling explosions" of the cars being blown up.  A small bit of hyperbole on Lewis' part here but I can say there have been an unusual number of car fires since the crisis. Coincidence? Who knows? Moody replies "but how a well-timed fireball will make one’s inflated car loan disappear remains a mystery". A mystery? Does Moody not think the insurance companies cover vehicle fires?  I don't understand his response.

Lewis writes "Iceland’s geothermic water is so hot that when municipal work is being done on the cold-water pipes, sometimes people are “boiled alive” in the shower. More hyperbole here but Moody responds to this by stating the water coming out of the shower can never exceed 70°C.  I got news for you Moody, water that temperature will burn you, quite well I might add.

Lewis writes most Icelanders are mousy-haired and lumpy and there are only about 9 surnames in Iceland.  Well I thought they were more redhaired and bulky and there were about 12 surnames but I not going to argue with Lewis because here he is obviously joking. No response was necessary by Moody but I guess he couldn't help himself.

Lewis comments  "Icelanders are among the most inbred human beings on earth — geneticists often use them for research."  Moody responds to this with "Now this is insulting. Icelanders’ DNA shows their roots to be a healthy mix between Nordic Y chromosomes and X chromosomes from the British Isles. The reason genetic-research company deCODE uses Icelandic genes for its research is not because the codes are so homogeneous, but because the population has kept excellent genealogical records dating back thousands of years."  I think Moody has watched too many  Thule beer commercials because there is no way to determine where the Y chomosomes come from.  Researchers use mitochondrial DNA to determine the probable origins of women in Iceland.  Using a myth to attack Lewis was not the best way for Moody to go.

As far a Lewis writing about elves, that is really something Icelanders sometimes like to mention.  It does not infer as Lewis thinks that Icelanders believe in elves, just as talking about sheep balls and brennivín to foreigners who visit in January and February does not infer that this is the daily diet of Icelanders.  The Icelanders just like to mention it.  To show the peculiarity of the culture to those not familiar with it.  Here, like Lewis was doing for most of his article, the Icelanders are joking with you. The mention of elves or sheep balls is not to be taken too seriously.  And neither was Lewis' article.  I wish Moody would have recognized this and just left the article alone instead of making a very poor attempt at trying to discredit it.

GTB Íslendingar engir hálfvitar
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Just Testing the Water

Today the Central Bank lowered the prime interest rate 1% from 18% to 17%.  Vilhjálmur Egilsson, managing director of Samtaka atvinnulífsins said this change was an "unbelievable small decrease" and would have liked to have seen the rate dropped to 10%.  A look at the exchange rate for the kronur today shows that the 1% drop was a prudent move by the Central Bank.  The kronur has continued its slide downward today by about 1.4% with the drop in the prime interest rate certainly not helping to slow the decline.  The Central Bank, in its press release today, sees the need to lower interest rates by understands something Vilhjálmur does not; a quick drop in the rate will mean a quick depreciation of the Icelandic kronur. 

Lower interest rates would be good news for individuals and businesses that have regular, non-index linked loans.  But any furthur weakening would be a distaster for those who have foreign currency loans.  These loans have already seen increases in payments of 60- 80%.  And a weak kronur will also increase the cost to import to Iceland adding more to the already high inflation rate. This will be felt by conumers in the shops and homowners who, as a majority, have inflation linked loans and have already felt an 18% increase in the principle portion of the payments . 

The high risk of lowering the prime interest rate too quickly far outweighs the savings that will be seen in non-index linked loans.  The high  prime interest rate has kept a lid on a predicted higher inflation rate and has given some strength to a battered kronur. The Central Bank was just sticking a toe in the water to feel the temperature.  Anything more than a toe and one risks being burned.

 GTB „Ótrúlega lítil lækkun"
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Where It All Falls Apart

20842.jpgKristinn Ingvarsson won The Photograph of the Year Award today.  His photo represents the exact moment when the total bank collapse begins.  Davið Oddson is about to announce the denial of a loan to Glitnir and instead the government will take a 75% share in Glitnir.  His action essentially makes the bank's private debt sovereign debt, the first of several Central Bank missteps.  More importantly, this action signals to the world and especially the UK that the Central Bank either will not loan or cannot loan to the big three banks, making international orphans out of Landsbanki and Kaupthing and bringing them down shortly thereafter with the freezing of their assets in the UK. I wonder when Kristinn took this photo if he or anyone else knew exacty what was being documented.

GTB Kristinn á mynd ársins
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Republican Family Values

This break-up should come as no surprise to anyone. It was just put together and held together  to show the "family values" of the Republican party during an election year.   I even heard Bill Bennett was taking bets on when this would end.  I know it is not nice to poke fun at someone else's misfortune; Bristol must be in heartbroken by all of this.  But not to fear,  that big warm family guy himself, Rush Limbaugh, can help her through the tough times by somehow blaming the break-up on the Democrats.  And if that doesn't help he can always hook her up with some prescription pain killers.


GTB Dóttir Palin orðin einstæð móðir
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BloodBath in Alabama

Financial turmoil, high unemployment, social unrest , oh, and don't forget, lots and lots of guns. What a wonderful combination.  No doubt we will be reading more stories like this in the coming months.

GTB Blóðbað í Alabama
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