The economic disaster did not “just happen” in October 2008. Those that want you to believe that the Icelandic government and business community was caught by surprise are selling you a big, fat lie.
Lets recap:
Spring 2006: According to a Merril Lynch report, the likelyhood of the Icelandic banks running into deep trouble within two years becomes highly likely. Danske Bank publishes a report on the Icelandic banks where they are criticized for going to fast in their expansion and running risky business models. Carsten Valgreen claims that there is a contraction looming worldwide and the “Icelandic banks have been driving at 200 km/h in the last few years and either you will get to the end by luck or you won’t get to the end at all”. Tryggvi Thor Herbertsson of the University of Iceland Economic Institute says that it is hard to say whether a contraction is around the corner but if so then it would pass by quickly.
Fall 2006: All three major banks run major campaigns where the emphasis is on “saving”. The reason was never hidden within Kaupthing at least. The banks had been too dependent on financing themselves in foreign capital markets. Those markets had become too expensive, so the ratio of savings had to be increased. The banks took to the phones and convinced customers to save. Within the banks two departments were fighting it out, the retail bank which wanted to promote its boring old savings accounts, and the investment bank which wanted to push its more glamorous funds. Landsbankinn’s slogan, “Spend on saving”.
Fall 2006: IceSave debuts in the UK. At a meeting within Kaupthing where the novel saving accounts are discussed someone raises a question. “Are you saying that the Icelandic government could become responsible?”
Summer 2007: “Iceland is not Thailand”, was the cry from Icelandic bankers as criticism came flying from all corners. “The banks were doomed by 2007”, claims Asgeir Jonsson head of Kaupthing analytical department in his book Why Iceland? in 2009.
November 2007: The head of Kaupthing’s retail banking division orders his staff to stop lending money. The staff is shocked as he describes an Iceland of 2008 where companies large and small and individuals go bankrupt. There are extremely difficult times ahead he says. Two weeks later he asks them if they weren’t listening. Stop lending any more money.
January 2008: Morgunbladid’s headline predicts a shakedown in the financial sector and predicts hundreds of jobs lost. First meeting of the year at Kaupthing’s development department and the message ain’t pretty. New product development is out and therefore so am I, with one of the explanations given being the “situation ahead you know”.
Spring 2008: At Apple’s retailer in Iceland we order the new MacBook Air in February and make sales predictions based on the usual metrics. The computers arrive in April and by then the Icelandic krona has dropped 25-30%. Despite all kinds of efforts the Air hardly moves well into the summer. The party is surely over. Rules regarding credit lines become tighter. Bills are being paid late or not at all. We suspect that some companies are shopping for credit before having to declare bankruptcy.
Summer 2008: Merril Lynch again warns of dire times ahead for the Icelandic banks. Thorgerdur Katrin Gunnarsdottir, Independence Party vice-chairman, minister of education and wife of Kaupthing CEO appears indignant on the evening news asking what sinister urges could possibly lie behind such criticism. As a minister of education she suggests that the specialist responsible for the report should seek adult and continuing education. Again, I lose a job. The CEO seems pale with fear as she hands me the resignation letter. Everything is going down the drain she says. A few months later it does. Both Kaupthing and the Apple retailer go bust.
It is nice to have a rearview mirror. Unfortunately most of us didn’t have any appropriate influence at the time. We were scared for our jobs and our futures. Don’t let the view proposed by the government that was in place at the time and the businessmen who ran the country distort what you see. If they didn’t see it coming then they were either blind or deliberately turning the other way.
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