I handed in a paper yesterday where I examined the correlation between self-image and opinion towards the krona.
The Icelandic krona has been praised by some as the nation’s saviour in some quarters while chastised as a root of many evils in others.
Where you stand on the issue seems to correlate with whether you perceive yourself as nationalistic or international.
Examining the political debate in Iceland, those with a nationalistic self-image are highly likely to view the krona in favourable light, those with a more international self-image were more likely to view it with suspicion and be more open for the adoption of foreign currencies.
So even if economic factors are obviously important, underlying emotional factors also contribute to the policies of the parties.
Related posts:
Gray, Germany
1 year ago
And then, there are also folks who are for thew Krona out of totally selfish reasons:
“Suspected currency criminal building luxury home”
http://www.icenews.is/index.php/2010/03/22/suspected-currency-criminal-building-luxury-home/
Such black market currency deals have to be expected whenever a currency’s official exchange rate differs from the real one determined by supply and demand. The difference between 170 ISK/EUR in Iveland, and 210 abroad allows criminals to easily make millions, at the expense of the government (and thus, the taxpayer). But, of course, the government can’t simply let the Krona float freely because that would result in an instant boost of the inflation rate and seriously hurt the citizen. There is no easy way out of this mess.
Vilhjalm A.
1 year ago
I think you can forget about the Euro and the EU. Forget about an Icesave agreement too.
A poll from 5. March shows 70% against joining the EU, up from 61%.
http://www.amx.is/fuglahvisl/14445/
The current pro-EU coalition is finished within a year or two. Samfylking is already toast. If they push harder for EU, they will get completely wiped out.
So the future for Iceland consists of currency-controls and foreign-currency crises and attempts to starve the population that the government will try to make look like are not attempts to starve the population.
I think the governent will solve the upcoming foreign debt problem by issuing foreign bondholders new long-term bonds, or giving them ISK that they can’t take out of the country due to currency restrictions. So there may not be any need for getting foreign currency loans from the IMF and EU.
As long as currency controls remain in place, this plan might actually work.
At the beginning of the hrun, when everyone was talking about all the options and remote contingencies, there was a lot of talk about how the British and Dutch and EU would bring lawsuits and/or kick Iceland out of EFTA and/or blockade the island for its various sins: the Emergency Law, not paying up Icesave, anti-discrimination, defaulting on debt, cheating foreign creditors, and so on.
I don’t think any of that is going to happen.
Instead, the UK/Nl and Europe will allow Iceland to try to survive on its own. They probably won’t take punitive measures. But they wont help Iceland either.
And you can blame blind Icelandic nationalism for whatever happens to you.
You could live exactly how the Danes live.
Or you can live like the Serbs, proud but poor, and nurturing an enormous persecution-complex..
Blubber
1 year ago
Vilhjalm A.
Yes, yes, and yes.
Iceland will end up isolated, run by miniature kings and cliques keeping the people in a vicious circle of debt, destitute and deeply patriotic.
Dadi
1 year ago
Never mind the EU…
It will be interesting to see how long Iceland can remain a member of the European Economic Area with the currency restrictions.
Boggi
1 year ago
@ Blubber, Dadi, Vilhjalm A.
Yes, Yes and YESSS!!!
snowball
1 year ago
at vilhjalm a.
its a tragedy that this seems to be the path iceland takes. very few people seem to realize where this might end. and even fewer realize that right now the imf is icelands only lifebelt. without the imf, the economical forces would be disastrous beyond imagination (just food for thought, one average salary would then equal one or two tank fillings, welcome to the developing world). most likely iceland could then only be run by a set of emergency legislations. though, this is probably the enviroment that miniature kings and cliques need to flourish (read the suckers who brought this country where it is now). as a foreigner living in this beautiful country its somewhat fascinating but also frightening to see iceland acting in the tradition of halldor laxness special friend bjartur. lets hope that the day wont come that the white c130 hercules planes are needed here. because bjartur would be far too proud to ask for help from these guys http://www.un.org/en/
snowball
1 year ago
at vilhjalm a.
its a real tragedy that iceland is following this path. few people seem to realize where this could end, the ISK means self choosen isolation and poverty for the masses (maybe even a ticket for various UN programs if things turn fatale). right now, iceland is kept afloat by the imf. without the imf, the disastrous economic forces would be beyond imagination for most peeps. how would people react if fuel is rationed or only available for rescue and police? Or when the average salary is not even enough to refuel your car once or twice a month (not to speak of food and medication prices)? the layers of civilisation would simply dissolve as history has shown, iceland is not special with respect to this. if people want to understand what the imf has so far prevented, they should jump in a plane and look on capitols like bukarest, minsk or belgrade. of course no one wants to know whats the real value of the ISK, because then many would realize that salaries in iceland are equivalent to salaries in a developing country or an emerging market country. i guess this is exactly the environment which miniature kings and mafia cliques need to survive. as a foreigner living in Iceland it is both fascinating and frightening to see how iceland follows the path of halldor laxness special friend bjartur.
Andrew
1 year ago
“I don’t think any of that is going to happen.
Instead, the UK/Nl and Europe will allow Iceland to try to survive on its own. They probably won’t take punitive measures. But they wont help Iceland either.”
This is probably true. Iceland is just not on the political agenda in the UK. In the upcoming British elections it will be “It’s the economy, stupid” as the focus of the debate. From a strategic point of view this is very short sighted, as an impoverished and resentful Iceland is not all desirable for anyone.
However, it is difficult to see how a compromise or assistance can be rendered to Iceland without benefitting the political forces of Nationalism. Any good deal for Iceland will be immediately hailed as a victory for stubborn negotiation from a position of moral righteousness, and would benefit the people who got you into the mess in the first place.
I suspect that the British and Dutch will wait for the 9 volume report after Easter, and see how that plays out on domestic Icelandic politics.
Lino
1 year ago
>They probably won’t take punitive measures
the billions euro UK+NL have disbursed are not exactly chicken feed… after the elections in the UK, I don’t think UK+NL are going to class the money they have anticipated as “charity for Iceland”… especially given the times, even for political reasons, if they gave up trying recovering “their” money, thay would turn out the suckers who paid for everyone (Iceland and UK+NL Icesavers)…
>an impoverished and resentful Iceland is not all desirable for anyone
please don’t be offended, but who cares about Iceland? Especially given the background of recent history?
JP
1 year ago
I am greatly amused by all these catastrophic visions.
Some people came here and will come here to make milions on this rocky island because they have their own ideas and visions.
And those who only complain will serve as labour force or they should move to other countries, more fair to them in their illusions.
Dadi and others, one idea for all of you – try to write one optimistic post, one optimistic scenario for Iceland, even most fantastic and we will discuss it.
Dadi
1 year ago
JP – this site is named Economic Disaster Area.
May I recommend this http://www.tidindi.is/ if you feel down after reading?
Blubber
1 year ago
@Daði
JP
1 year ago
Dadi, when you started this blog Iceland was an Economic Disaster Area.
But now in March 2010 it is not the only one and not the biggest economic disaster area in the world.
In fact, the world ‘disaster’ seems to be highly exaggerated now. Things can always go worse, so be happy with this ‘disaster’. Some other coutries are not so lucky.
I moved from Iceland to Ireland and then I saw a real economic disaster.
Snowball,
I am just curious, do you use a car with 600 liters fuel tank and you manage to burn it all in a month?
Not very environmental friendly at all…
Dadi
1 year ago
It is good to see that someone thinks we should be happy with the current situation in Iceland.
Now is not the time to fall asleep JP. Iceland has a lot of issues to deal with for years to come and pretending otherwise is wishful thinking.
Vilhjalm A.
1 year ago
Iceland seems to have escaped, for the moment, a true meltdown but this is mostly due to one unstated policy decision — the repudiation of nearly all foreign debt and claims — and fungible export commodities (energy for aluminum and fish) and the unwillingness of employers to fire employees. Plus strict currency controls.
70% of companies are insolvent, 30% of homeowners are insolvent, the banks are technically insolvent (they do not have enough money to pay out depositors), and the government is basically insolvent, and the currency is not convertible outside Iceland (which means it’s worthless). So essentially you have a zombie country, that remains afloat only because no one is trying very hard to collect their debts. And as Japan demonstrates, zombie countries can stand upright for quite a long time.
If you go back 10-12 years, I would guess that you would find that only a small number of companies and individuals were in deep financial trouble and there was probably a lot of money, real money, floating around. So if you measure countries by how far they have fallen, then I would argue that Iceland really is a disaster zone. 70% of companies are insolvent and the government is broke — that sounds like a collapse to me. And I imagine if you were to calculate the real purchasing power of the average Icelander and the real value of their savings and assets, the results would be very depressing. Except for the old people who own their homes and get pensions. And bank insiders, of course.
If Ireland is suffering, and no doubt they are, it is because they have decided to take their medicine now, including high taxes and unemployment, whereas Iceland is merely delaying the inevitable.
JP
1 year ago
I sleep very short hours
I know there is a huge a lot to do with restoring the economy of Iceland.
But personally I see a lot of opportunities and I am working on it.
What makes me think optimistic is how some companies have changed. The one I work for cut costs to a quarter of the costs from 2007 remaining the same output. But now no one is paid for doing literally nothing as it was before.
On the other hand some companies which are monopolists or biggest player in the game seem to think that nothing have changed and they think that Icelandic customers will buy anything they want for whatever the price and it will last forever.
But it won´t.
And this is a field to be explored by small, more flexible firms.
And as for a tourism alone… There is almost immense field for improvement and a lot of possibilities to make money.
JP
1 year ago
Vilhjalm A.
The funny thing about Icelandic krona is that there are countries where ISK is transferable at exactly the rate of Sedlabanki, and there are countries that it is not possible, and others where ISK is not transferable at all.
As I said before, you, Icelanders,tend to have too narrow perspective in looking at things how they really are like.
But try to take a broader look
Boggi
1 year ago
@JP.
Yes, yes, in fact nothing happened here, it was just a little bump on the road, wasn’t it? and elephants can fly, and life is pink.
JP
1 year ago
Boggi,
The bump was 10 years ago, now Iceland is on the road again.
During the flight the road seemed to be perfectly flat, but reality is that it is gravel, not especially good for all those easily airborne ferraris.
So now take a walk on a wild side
snowball
1 year ago
at jp
sometimes i have these dreams where i find myself in front of the parking garage of the money heaven suckers. nota bene, a caterpillar d11 or a leopard 2 need at least 600 liters to finish the job
Gray, Germany
1 year ago
Everything is relative. In comparison with, say, Haiti, Iceland sure looks like paradise!
Ok, seriously, optimism is necessary for reforming the economy, of course. But I don’t think it’s helpful to simply ignore the dire problems and rely on them somehow, magically, going away. Wishful thinking is not a reasonable strategy. Or else Greece would be the boom country of Europe.
JP
1 year ago
But coming to the point – For or Against Krona, what is an alternative now ?
The krona is the only existing currency and cracking the brain on finding the answer is simply unnecessary wastage of time.
IMHO the main question now is to find a vision of future model growth for Iceland.
Almost one third of Iceland GDP in 2007 was provided by banking sector and financial services, only sth like 10-12 % by aluminium smelting and the same amount 10-12% by fisheries (at least these numbers were quoted by Financial Times).
If Iceland is going to enter EU and Eurozone, the only way to ‘be happy and healthy’ in EU is to be net exporter, like Germany, so focusing on production and tourism and renewable energy seems to be the only option.
But with ‘Eg vil ekki vinna, eg vil bara drekka drykk’ attitude Iceland will not make any progress.