More Fuel for the Fire

With the kronur still very weak against all other currencies and the prime interest rate holding steady at 13%, Everyone was looking for some relief from the crisis in the lowering of the inflation rate.  The rate was as high as 18% and has come down to around 11%.  Last month there was a slight tick upwards as the weak kronur took it's toll on imported goods. But there was a chance, with a small strengthening of the kronur over the last few days, that next month would see the inflation rate drop again as house prices continue to fall. 

But leave it to the government to take the only glimmer of hope left in Iceland and destroy it with a tax increase on the one item that effects the price of nearly everything else-FUEL. This will cause a rise in inflation and increase all indexed linked loans, the most important being house loans. This will be coulpled with a rise in food prices as it will cost more for delivery. Add any poor souls who have to drive to work or drive for work and the damage for them will be even greater.

As if we were not burdened with enough debt, the have decided to add a little more.  This new government did promise to help us, we just didn't know they meant help us go further into debt.  Break out the pots and pans, they seem to be needed once again.

 

GTB

Álögur á eldsneyti og áfengi hækka

American Terrorists

So, the Sea Shepard might be returning to Icelandic waters.  I have to say I don't worry about the Icelanders at all in there is a confrontation.  The Icelanders kicked the shit out of the British in the Cod Wars so one crappy little ship full of enviromental pussies isn't going to be any problem. If the Icelanders just played hardball right from the start the Sea Shepard will put the proverbial tail between it's legs go home.  The only real damage these wackos did was to scuttle a few ships in the night, a method preferred by the cowards that they are.  You don't see the Sea Shepard fuck with the Norwegians.  They know the Norwegians would send their ship to the icy bottom where it belongs, as they have the Navy to do it.  The Icelanders just need to employ the same tactics they used in the Cod Wars and it should be no problem to damage the Sea Shepard of even sink it.  Hopefully the captain will go down with his ship.  If there is one whale I'd like to see wash up on the Icelandic beach, it is that fat fuck Paul Watson. How poetic would that be?

 

GTB

Aðgerð Ragnarök endurvakin

Higher Taxes?

Thats's the word on the street today.  The government may use this occasion to announce higher taxes on alcohol and even gasoline and diesel.  Maybe as high as 25%.  We will just have to wait and see.  There is a sinking feeling though that the government is not being entirely truthful as to how screwed the country really is.

GTB

Fundað á Þjóðminjasafni

A Peg Could Work

This could be a solution to the severe currency crisis facing Iceland that I wrote about today. http://www.gregg.blog.is/blog/gregg/entry/885025/.  A peg is always difficult to maintain but a possible solution is to to use the IMF standby loan to bolster the Central Bank's foreign currency reserves, necessary to maintain any peg.  (Just ask Davið when he tried to peg the kronur with almost no reserves. That peg still remains the shortest in monetary policy history at one day.)

At any rate, it is good to see that others can see the weak kronur is the most important problem facing Iceland now, and are making some viable suggestions.

GTB

 

Festa gengið í 160 - 170

The Problem Started and Remains with the Currency

Well, inflation has reared its ugly head again here in Iceland with a 1,13% increase over last month.  This bad news should come as no surprise to anyone.  I pointed out back in March in a previous blog entry called Kreppa Part 2 http://www.gregg.blog.is/blog/gregg/entry/841458/ that the weakening kronur was going to cause furthur inflation, eating away at any savings seen in the then 1% drop in the interest rate.  There will most likely be no further reduction in the prime interest rate as it does not help the current situation at all.  The whole problem from the beginning of the crisis has been the weakened kronur. It is the prime cause of the inflation seen today. And the weak kronur has an adverse effect on nearly everything else. Companies and individuals are heavily burdened with the ever increasing size of loans taken in foreign currency.  As the debt rises so will the defaults.  Nearly every town in Iceland is in even more dire straits because of their borrowing in foreign currency. Unless there is some solution to the kronur in the near future, the situation will begin to look even more bleak. 

And there could be even more bad news. Iceland is coming to a point where it may need to do one of two things.  The banks and government will either have to write off all the foreign currency debt and suffer the consequences of being nationally bankrupt for the future and claw its way back, or the country will have to eventually fall under the economic influence of the EU or some other nation, let the economic "hitmen" come in, and begin selling its fishing rights, power plants and anything else it can to survive.  But if Iceland would need to do the latter, what would be the point of "surviving"?

 

GTB

Verðbólgan mælist 11,6%

A Sudden Change of Mind

Finally the kreppa has made it's way, after an apparently long journey, into the halls of the Althing.  The members of the Althing will no longer be able to have "assistants" to help them with all the difficult work at the taxpayers expense.  Looks like they will actually have to bear the workload themselves for the paltry 750.000 to 850.000 kr per month salary they make. If the members still find the need for an assistant, they can do like the rest of us do and hire one, and pay for that person out of their own pocket.  I wonder how many members would need assistants then?

The big question that needs to be asked is "How are they going to get anything done without their trusty assistants?" Hopefully, with the government that is is charge, they will not be able to do much.  With ideas like joining the European Union, banning whaling, or a sugar tax (as if we are not taxed enough), one has to start to wonder, nervously, just exactly where this is all headed.  The real fear is that doing not much might actually be the real plan; so the Icelanders, beaten and bankrupt, will have no other choice but to sell their national soul and join the EU, which is the only true goal of Samfylking.

I told many people that I thought Icelanders would never join the EU.  There is really no great benefit in doing so and the Icelanders have worked too hard for their independence and their fishing grounds to vote it all away and join the EU.  But the crisis could worsen here and many people could begin to feel as if they have other choice. 

Just recently, a friend of mine was talking to a group of people in the Egilsstaður and they started to tell him that maybe joining the EU was not such a bad idea.  My friend replied, "No, it is not a bad idea to let Brussels make decisions for Iceland.  After all, Reykjavík has always considered the issues of Egilsstaður when making decisions so I am sure Brussels will do the same for Iceland."  The people in the group, for some reason, suddenly changed their minds. 

 GTB

 

 

Aðstoðarmannakerfið afnumið

Over 200 Children Could Have a Dental Checkup- Per Day!

It is absolutely amazing that the government is talking about putting a "sugar" tax on soda as a means to raise money so that children can have a dental check-up but has no problem finding the money to keep 22 members of parliament on minister pay for up to 6 months.  The average pay is 992.000 kr per month! Multiply that by 22 and it is 21.824.000 kr per month. If the government paid down the  dental check-up for each child 5.000 kr,( my kids check-up was about 6.000kr) 202 children could go to the dentist each day! That is over 4.300 per month and over 52.000 per year. Only 49.223 children went to the dentist last year.  The government has the money; is just that they would rather spend it on themselves. Shame on us for believing the bullshit that comes out of these politicians' mouths.

GTB

22 á ráðherralaunum

15.05.2009

There is always a well-known solution to every human problem--neat, plausible, and wrong.     H L Mencken

Junk Science

Exacty how is putting a tax on soda supposed to help the children of Iceland with their dental care?  Are we not already paying tax on soda?  Is the government going to put on more tax? Are they hoping the higher tax will slow the consumption of soda among children?  That system doesn't work well for alcohol or tobacco or anything else for that matter so where is the reasoning behind the higher tax on soda?  I doubt the government will use the new tax income to pay for the children's dental visits.  In fact what usually happens is the government becomes addicted to the revenue from the higher tax and then uses the sales as a cash cow to fund everything but the problem it was meant to fix. 

If the government of Iceland wants to promote better eating among children how about taking the tax OFF of foods that they consider healthy. I know this is quite a concept for any government; to REDUCE the taxes. Why for the love of goodness is there tax on milk, vegetables and fruit? How insane is that? And by the way who is going to decide what is healthy or not, some government agency?  How are we going to pay for that new committee? Oh yeah, the higher taxes on soda or anything else they deem unhealthy. More money right into the politicians' pockets. Great! What about diet soda? There is absolutely no nutritional value and it contains Nutrasweet.  It must be worse in Iceland to have a few cavities than to be overweight with brain damage caused by the artificial sweetener.. At least that's what the science says about Nutrasweet.  But who needs science when we have public opinion that says sugar, the substance the body needs everyday, is the real demon.

It is absolutely stupid to single out one food as the cause of all the dental problems in Iceland and to think a tax on it will solve the problem.  The government is trying to distract the people with a "feel good" tax instead of addressing the real problem: Affordable dental care for children.  Ögmunder needs to find a real solution to the problem because taxing soda certainly is not it. Actually there already is a solution, it's called a TOOTHBRUSH.

GTB

Sykrað gos skattlagt?

Sad to Say; The IMF is Right

What's the big deal anyway with the prime interest rate?  It is exactly at the same rate it was three years ago so nobody can complain they are paying more interest than they were. The only reason to lower interest rates is to open up the availability of credit.  The banks are nearly bankrupt so they certainly don't have any money to lend anybody even if the rates were lower. The only thing the interest rate seems to be affecting is the value of the already weak kronur.  If the Central Bank is trying to seek parity with the value of the kronur outside of Iceland  they should go ahead and lower the interest rate some more. Then we will see how low the kronur can really go.

The most difficult problems facing Iceland today is higher inflation and the ever increasing debt linked to foreign currency loans. Both are caused by the weak position of the Icelandic kronur.  Lowering the prime interest rate will not help Iceland with these two pressing problems. It is just going to make these two problems worse.

GTB

Seðlabankinn í klemmu