Everything Well Under Control? - The Reykjavik Grapevine

Everything Well Under Control?

Everything Well Under Control?

Published November 23, 2010

Some of you may recall the wave of Nigerian scam emails that hit businesses the world over in the 1990s. Generally the offending email, a bit of fluff promising a hefty return on investment (supposedly penned by some ousted colonel or ex-bank manager on the run), would request the recipient to transfer an small percentage to some offshore numbered account in the form of a deposit to secure the hidden millions. Stltoday.com, a St. Louis, Missouri news website, ran a story this month that the Lincoln County Sheriff’s Office was investigating a scam whereby the alleged Icelandic lottery was to pay out Missouri residents, winners of the so-called Icelandic office of the MTA Sweepstakes, after a one-time-handling fee of USD 1.000.00. “Winners” received fake cheques under the name of the Icelandic Lottery.
Two years after the collapse of Iceland’s banking system, Iceland is still struggling to come to grips with the demise of everything that once made it the richest country in the world. The Special Investigator’s Office, working in collaboration with the UK’s Serious Fraud Office (SFO), are supposedly preparing hundreds of cases, yet the Icelandic nation has yet to see a single ‘bankster’ brought to trial. In October, The Daily Mail pointed out that the SFO is investigating some of Kaupþing’s largest lenders. Among them Robert Tchenguiz, who borrowed over 1.2 billion GBP, which he used to buy stakes in UK retail chain Sainsbury’s, and Sports Direct founder Mike Ashley, along with three ‘unnamed’ others. Yet, the Daily Mail states that “the Icelandic government is keen for any trial to be held on the tiny North Atlantic island. But it is understood the authorities are not interested in pursuing any individuals who do not have an Icelandic surname.” Does the expression “burying ones head in the sand” ring any bells?
In a Bloomberg interview, Atli Gíslason, chair of the committee that recommended former Prime Minister Geir H. Haarde’s indictment said, “I’m growing impatient waiting for indictments from the special prosecutor. I have strong indications that there was a lot of criminal activity within the banks from the beginning of 2008 leading up to their collapse; criminal acts were committed.
In the same vein, it appears that despite a turnout of an approximated 8.000 protesters in front of Alþingi on October 6, and Jóhanna Sigurðardóttir’s renewed promise of finding a workable solution for the massive wave of insolvencies, appears to have made little progress. Despite a five month moratorium on foreclosures, and numerous proposals put forward for a blanket debt forgiveness of the equivalent of USD 1.8 billion, the government appears to be giving into objections posed by the pension funds, which claim the blanket proposal will damage their assets and force them to reduce pension payments (even further). Gunnar Helgi Kristinsson, a professor of political science at the University of Iceland, was quoted by Bloomberg as saying: “I can’t understand [Jóhanna’s supportive gesture] any way other than as theatrical…By pretending this was actually on the table and being considered, Jóhanna managed to provoke opponents such as the pension funds, which look at these matters seriously and know this idea is completely ludicrous.’ As Bloomberg aptly stated earlier this month: “A write-down of USD 1.8 billion is equivalent to 8% of the total assets of Iceland’s three biggest banks.”
NASDAQ’s recent economic indicators paint a very grim picture of things to come:
– Actual inflation has risen by 41%from January 2007 through September 2010
– Disposable incomes have dropped by over 20% last year
– Wages have fallen by over 10% from 2007 to August 2010
– 63% of Iceland’s mortgages are on the brink of bankruptcy
– 40% of homeowners are already ‘technically’ insolvent
It appears then, that the only way to solve the mortgage crisis is for the Icelandic government to cover the losses. After all, you can’t have over 50% of the country on the street, can you? Yet, strangely, on October 12, an unnamed Icelandic finance ministry official told the AFP that, “We are weighing our options and debating whether we actually need the loan from the Nordic countries at the moment.”
So, everything is well under control then?
Dian L. Chu, a NASDAQ economist, speculated that although the dramatic 60% plunge of the Icelandic króna has assisted Iceland in its exports, “Iceland [has essentially] been held together…by ‘technical defaults’ and capital control…domestic inflation, and asset devaluation, most likely will wipe out the entire middle class.”
Eiríkur Bergmann Eiríksson, politics professor at Bifröst University, was quoted this month in the Financial Times in relation to the October 6 demonstration. He said, “Two years ago this week, the financial system collapsed. This week, we’ve found out that the political system has also collapsed.”

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