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Let Them Eat Shitpile(TM)

by Migeru Mon Oct 6th, 2008 at 03:17:15 AM EST

Compare the following two stories.

Bloomberg: Glitnir Plummets After Bailout; Byr Cancels Talks (September 30 2008)

Glitnir Bank hf, the Icelandic bank bailed out by the government yesterday, plunged the most in eight years as trading resumed in Reykjavik. Byr Savings Bank canceled talks with the lender about a possible merger.
The Guardian: The party's over for Iceland, the island that tried to buy the world (Sunday October 5 2008)
People talk about whether a new emergency unity government is needed and if the EU would fast-track the country to membership. On Friday the queues at the banks were huge, as people moved savings into the most secure accounts. Yesterday people were buying up supplies of olive oil and pasta after a supermarket spokesman announced on Friday night that they had no means of paying the foreign currency advances needed to import more foodstuffs.
I can understand a government rescue to avoid a bank run, but there's no talk anywhere of a government rescue of that food importer, in a country which is greatly dependent on food imports to feed its population.

If banks can't roll over their loans in the international money markets Icelanders won't be able to get credit, so the government intervenes. But if supermarket chains can't roll over their loans in the international money markets the Icelanders won't be able to eat and the government does nothing.

What does that tell us about government priorities?

Update [2008-10-7 5:37:35 by Migeru]: It appears that the Icelandic government is doing the right thing in relation to its banks. This from The Guardian [UK] (via a comment by vbo):

In an address broadcast on Icelandic television, prime minister Geir Haarde said the bill, supported by opposition parties, would allow the government to push through mergers between the battered Icelandic banks or force them to declare bankruptcy.

..."As recently as last night, it looked like the banks could continue operations for a while," he said. "This morning and today, things have totally changed for the worse."

...The emergency bill, which parliament was due to adopt last night, would also allow the government to take over housing loans held by the banks and put them in a government housing fund.

I don't think they will let food imports stop either, but if they run out of reserves they might be in a pinch.


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More context from the linked stories. This from Bloomberg:
Iceland's banks, which rely on money markets for funding, have been among the hardest-hit in Europe as investors shun all but the safest assets. The country's government is investing 600 million euros ($859 million) in Glitnir in return for a 75 percent stake.
and this from The Guardian:
'Customers would come in and we would apply for credit online for them, a 100 per cent loan, and they can drive away in their new Range Rover. It took ten minutes, it was very easy. But 60 to 70 per cent of those loans were in foreign currency, Japanese yen or Swiss francs, and they have gone up 90 per cent as the krona burns. A car worth 5 million krona now has a 9 million loan on it; how are people going to make those payments?'


A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 03:20:12 AM EST
What does that tell us about government priorities?

Nothing good, I'm afraid.

I used to gloat about the way their pyramid scams collapsed just as every Friedmaniac in Denmark was orgiastically praising Iceland for being forward-looking and "reform" friendly. But runs on food stores kinda puts a dent in my schadenfreüde.

(Funnily enough, Iceland pretty much disappeared from the Danish press when they went belly-up - the boom was newsworthy, but apparently the bust wasn't.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Oct 6th, 2008 at 03:30:20 AM EST
Shocking that. Same with Ireland: it suddenly stopped being used as a shining example as soon as it looked like the gloss was coming off it.
by Colman (colman at eurotrib.com) on Mon Oct 6th, 2008 at 03:32:31 AM EST
[ Parent ]
And people around me call me a whiner when I complain that the Danish news are shitty bought and paid for neoliberal advertising.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Oct 6th, 2008 at 03:37:48 AM EST
[ Parent ]
Ireland needs more "reform" today.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Oct 6th, 2008 at 05:24:06 AM EST
[ Parent ]
Hmmm. 'Reform' or food?

Decisions.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Oct 6th, 2008 at 05:32:08 AM EST
[ Parent ]
If you help bankers, bankers will have enough money to eat. Isn't that what you need?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Oct 6th, 2008 at 04:08:23 AM EST
Only bankers eat olive oil and pasta anyway.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Oct 6th, 2008 at 04:51:53 AM EST
[ Parent ]
The proles eat Hákarl or kæstur hákarl (Icelandic for "fermented shark") which
is a food from Iceland. It is a Greenland or basking shark which has been cured with a particular fermentation process and hung to dry for 4-5 months. Hákarl has a very particular ammonia-rich smell and taste, similar to very strong cheese. It is an acquired taste and many Icelanders never eat it.
h/t Metatone.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 04:53:45 AM EST
[ Parent ]
Is "fermented shark" a metaphor for Icelandic bankers current state...?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Mon Oct 6th, 2008 at 05:57:10 AM EST
[ Parent ]
No.  That's a demented shark

Vote McCain for war without gain
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 6th, 2008 at 06:22:06 AM EST
[ Parent ]
If it is, then Icelanders are surely having a whale of a time.

--
$E(X_t|F_s) = X_s,\quad t > s$
by martingale on Mon Oct 6th, 2008 at 06:32:53 AM EST
[ Parent ]
More free lunches?

Vote McCain for war without gain
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 6th, 2008 at 06:22:49 AM EST
[ Parent ]
You should have titled it "Let the eat Credit Swaps."

Hey, Grandma Moses started late!
by LEP on Mon Oct 6th, 2008 at 05:12:14 AM EST
That doesn't have the same shock value.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 05:23:12 AM EST
[ Parent ]
Just wait a couple of weeks (or maybe, as things are going, a couple of days).
by t-------------- on Mon Oct 6th, 2008 at 06:07:57 AM EST
[ Parent ]
This thing would be funny, if it weren't tragic.
by t-------------- on Mon Oct 6th, 2008 at 06:08:37 AM EST
[ Parent ]
It is funny now - tragic will come soon enough.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 06:14:12 AM EST
[ Parent ]
We're coming to the endgame. The financial system is broken beyond repair, and is simply not fulfilling its basic tasks (lending) normally anymore. The temporary fixes (liquidity injections, and partial recapitalisation by governments) are no longer sufficient to solve the problem.

So a large scale solution is needed. I still don't see anything but large scale nationalisation to have a chance to work.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Oct 6th, 2008 at 06:19:15 AM EST
[ Parent ]
The decision-makers are ideologicaly ill-equipped to deal with the crisis.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 06:22:49 AM EST
[ Parent ]
But they are politicians: they usually come equipped with a keen instinct for survival.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Oct 6th, 2008 at 06:44:35 AM EST
[ Parent ]
Not in Sweden.

Minister of finance: If banks in Sweden get into trouble and comes to me with demands on the national treasury, then they'd better hand over their shares at the same time. They will not get a single krona from the Swedish treasury if it's not linked to ownership.

Head of the Debt Office: if you get an earthquake in the financial system the state will have to socialise banks or whatever is necessary. So what? It's not about ideology, it's about crisis management.

Both are/were hardcore libertarians/market fundamentalists.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Oct 6th, 2008 at 07:10:23 AM EST
[ Parent ]
You guys seem to have nuclear waste disposal and financial crisis management down pat. How do I get a job in Sweden?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 07:18:15 AM EST
[ Parent ]
"hard core market fundamentalists" raised in a social democracy (from my iberian/latino-raised, anglo-living perspective, Sweden is definitively a social democracy). Education and culture are biasing perspectives here.

I strongly believe that a typical Iberian social-democrat (in Iberia called socialist) is, by cultural bias, similar to a Swedish liberal. Or to, put it in another way, your current Swedish government is, by cultural imposition, more left-wing that they would like to be.

More than ever, REAL social democratic mental and cultural bias is the best defense against what is coming.

by t-------------- on Mon Oct 6th, 2008 at 07:27:08 AM EST
[ Parent ]
Off topic - how common is it for Portuguese commentators to refer to Iberia? Both you and Luis de Sousa do it with some regularity. I've never seen it in Spain as we have an unfortunate tendency to ignore you :-(

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 07:30:34 AM EST
[ Parent ]
Extremely uncommon.

Portuguese don't ignore Spain (big and only land neighbour), but rarely people refer to Iberia.

The two samples that you know off are not representative at all of the majority in that respect.

by t-------------- on Mon Oct 6th, 2008 at 07:42:48 AM EST
[ Parent ]
Oh and I might add that Borg wants to "reform" (hehe, regulate that is!) the bonus systems used in financial companies, so that they "increase financial stability", implied that they decrease it today because of the short termism (be in the business for just a few years while the music plays and you can bail out with your "fuck you money"). He also said that the bonuses we have today are "morally offensive".

And he should know. Before he became a politician he worked as a banker at ABN Amro and SEB.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Oct 6th, 2008 at 07:35:33 AM EST
[ Parent ]
Here they just said that Sweden government too guarantied all bank deposits as well as Austria and Denmark...

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Mon Oct 6th, 2008 at 08:31:33 AM EST
[ Parent ]
No, they doubled the deposit guarantee from about €25,000 to €50,000. It's to stop people from withdrawing their money from Swedish banks and putting them into foreign banks who have also had their guarantees increased.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Oct 6th, 2008 at 08:36:34 AM EST
[ Parent ]
Yeah, but that's nothing compared with the Irish debt guarantee...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 08:45:26 AM EST
[ Parent ]
is not credible IMHO. The gov't can't print the currency in question and faces other serious troubles.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Mon Oct 6th, 2008 at 09:48:05 AM EST
[ Parent ]
I am sorry but I don't see any of these guaranties as credible. They just want to stop people from taking money from the banks but in case they really decide to take it...? I don't know if they can print money that fast? And we all know where this will lead. Hyperinflation!

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Mon Oct 6th, 2008 at 10:06:37 AM EST
[ Parent ]
The Danish guarantees are credible, because they only cover depositors, not interbank lending, and are capped somewhere in the fifth digit (in €). Even if the entire retail banking system falls apart (it won't... it probably won't), it won't be the depositor guarantees that break the Danish economy.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Oct 6th, 2008 at 05:03:09 PM EST
[ Parent ]
Well, the Irish chose the worst possible option. Effectively they've signalled that the Irish banks are insolvent and that they're willing to have the state pay to save the management and shareholders.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 10:17:57 AM EST
[ Parent ]
Nationalisation is sooo last century...

We should disintermediate the banks entirely, and let them morph into pure service providers who need therefore put no capital at risk.

ie everyone receives credits issued direct from Central Banks (ie we all bank with the central bank direct) and "Risk-managers-and-administrators-formerly-known-as banks" assess "Guarantee Limits", operate the system, manage defaults etc etc.

Users of the guarantee make a payment for system use, and also a provision against default, into a "Pool".

I see that as an interim measure to ensure the necessary credit for the productive economy.

Central Banks may then in turn be disintermediated so that Treasuries (operating at local level as would the risk managers) issue credits direct, and the Central Bank becomes a monetary authority - as in Hong Kong, which has never had a Central Bank.

To avoid asset bubbles, I would replace secured credit with "Unitisation" of the relevant assets, but that can wait.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Oct 6th, 2008 at 07:20:26 AM EST
[ Parent ]
for you and for jerome commet.. yo need a huge huge huge clap in the back...

Best commentary on the web.. here in ET.. period.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Mon Oct 6th, 2008 at 06:49:37 AM EST
Psst... se dice a pat on the back.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 07:10:31 AM EST
[ Parent ]
I thouhgt that clap also meant "stronger than pat" and not only a clap "like clapping"...

I meant "a stronger than a pat in the back ".

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Mon Oct 6th, 2008 at 09:53:46 AM EST
[ Parent ]
Give me a whack upside the head.

Dame un capón.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 10:16:52 AM EST
[ Parent ]
Precisely.. a capon of congratulations :)

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue Oct 7th, 2008 at 09:25:04 AM EST
[ Parent ]
The Norwegian publication "Dagens Narensliv" reports that shares in the following Icelandic banks have been suspended...

Exista; Kaupthing; Glittnir; Straumur; Landsbanki and Spron.

It appears that this is because Kaupthing are going to be the next fermented Bank.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Oct 6th, 2008 at 07:03:07 AM EST
[Drew's WHEEEEE™ Technology]

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 07:11:51 AM EST
[ Parent ]
I was hoping as hell that we (Serbs living now in West countries)  are not going to have "repetition"...but the outlook is grim...
I should hurry up with my diary "how to survive crises"...haha


Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Mon Oct 6th, 2008 at 07:32:14 AM EST
Haha, indeed!

The Icelanders have a leg up on you on the "stock up on olive oil and pasta" bit.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 07:33:26 AM EST
[ Parent ]
When I read this to my husband he said "And we don't have any reserves in the house. I am going tomorrow to buy them".
I am still not sure if I should take our money from the bank...yet. On the other hand even if we do not have big mortgage if the bank goes my house goes too. So what's the point of taking money out if it's going to be without any meaningful value...I remember when we did not bother to take my husband's salary from the bank at all.Lucky we had a home business that we were able to ask German marks as currency of payment.This is my first time to face crises in capitalism so I am looking for your help.
Economists here in Australia keep telling us that nothing is going to change fact that crises will grow. It's going to affect Australia but in what way exactly they are not telling us. In order not to spread panic they keep telling us that our banks are better positioned then others to survive crises. But is this true? The heck if I know.
I read somewhere that all though EU is going to be affected greatly the "New EU" (East European countries) will suffer big time, much more then West Europe. Who knows?


Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Mon Oct 6th, 2008 at 09:37:47 AM EST
[ Parent ]
I'm reminded of Neville Shute's post apocalyptic novel

On the Beach

set in Southern Australia as the radiation that has wiped out everyone to the North works its way inexorably South....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Oct 6th, 2008 at 12:44:46 PM EST
[ Parent ]
My my my.  Food shortages in the "civilized" world.  A wonderful time to have visited this planet.  Anybody want to predict the MAJOR world events over the next 2 years?  See any hunger in your futures?

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Mon Oct 6th, 2008 at 08:30:12 AM EST
My my my.  Food shortages in the "civilized" world.

Yes, looks unbelievable but it does not matter if the country is food importer or exporter...it's not about food it's about money.
 I could hardly believe that people in Serbia can ever be hungry (if Serbs produce anything it's a food). But Milosevic promised that we will eat "roots" and it was almost truth. On the other hand Serbs would eat "roots" gladly if he declared war and if he was the first to start eating roots (instead of caviar and champagne) but even then it was obvious that his family and his men actually robed us while preaching sacrifice for "fatherland".
Same will happen now. They'll explain that we people need to sacrifice to save "our way of life" while in the main time few will become rich beyond comprehension...


Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Mon Oct 6th, 2008 at 09:17:05 AM EST
[ Parent ]
Time for a charismatic world leader to rise; if helped, this "experiment" might still be turned around.

Will have to get back in touch with the Obama camp; they might welcome a scientist/engineer who wants to create businesses/jobs (in northern CA to start, of course).

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Mon Oct 6th, 2008 at 09:30:49 AM EST
[ Parent ]
We don't need world leaders, we need good politicians who work for the best of their country and cooperate well with other countries.

I am also wary about the charismatic part - I would like good, decent and intelligent leaders.

Btw. according to my grand-father who was a socialist, Hitler was considered charismatic too and a terrific orator - and look what it got Germany and the world. So this is not something on the top of my list for what I expect from a good politician or leader.

by Fran (fran at eurotrib dot com) on Mon Oct 6th, 2008 at 09:40:17 AM EST
[ Parent ]
True true.  But in America people have been dumbed down to such an extent that I am concerned that ONLY a charismatic leader will be listened to.  Along with being decent, intelligent, etc.

Will have to find where the food warehouses are in northern CA.  Those with access to food stores will have greater influence in a starving population.

Fran: Believe it or not, we're on the same side.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Mon Oct 6th, 2008 at 09:55:03 AM EST
[ Parent ]
Has anyone (outside of us Unserious People© on ET) bothered to notice this is a GLOBAL financial crises requiring a GLOBAL solution?  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Mon Oct 6th, 2008 at 12:09:05 PM EST
Sarkozy make noises in that direction but Merkel disagreed.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 12:10:19 PM EST
[ Parent ]
http://www.guardian.co.uk/business/2008/oct/06/creditcrunch.marketturmoil4
Time appeared to be running out for Iceland to deliver a solution to the financial crisis as the currency slumped 30% against the euro
...In an address broadcast on Icelandic television, prime minister Geir Haarde said the bill, supported by opposition parties, would allow the government to push through mergers between the battered Icelandic banks or force them to declare bankruptcy.
..."As recently as last night, it looked like the banks could continue operations for a while," he said. "This morning and today, things have totally changed for the worse."
...The emergency bill, which parliament was due to adopt last night, would also allow the government to take over housing loans held by the banks and put them in a government housing fund.
...The government also followed the likes of Ireland and Germany by guaranteeing all of the domestic deposits in Icelandic savings accounts, although UK savers in the popular Icesave and Kaupthing Edge accounts run by the Icelandic banks will not be covered.
...Haarde warning Icelanders at the time of "the inevitable cut in living standards" to come.
...for many thousands of individuals in Iceland who were encouraged to take out car loans and mortgages in foreign currencies in recent years.
...In Iceland, there was widespread fear.
...everyone in the country was "holding their breath". She today withdrew her cash from the bank, all the way to her overdraft limit, to make sure her family had enough to live on.
...We've all been living ahead of ourselves, so in many ways this was inevitable. People here have been so obssessed with money. Iceland is like a nouveau riche country. same here in Australia(vbo).
...We trusted the banks and they encouraged us to borrow money."same here in AU(vbo)
...Iceland has undergone a remarkable transformation in the past couple of decades, from an economy largely based on fishing to one of the richest in Europe, driven by its biggest three banks following deregulation of the banking system. The banks grew rapidly on borrowing and now have assets eight times Iceland's GDP. But the party has come to an end, with the krona losing more than half its value against the euro in the past 12 months, inflation running at 12%, and interest rates at 15.5%


Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Mon Oct 6th, 2008 at 07:41:58 PM EST


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