Recession Diary part 8
During my recent visit to Hong Kong everyone seemed to have heard about what happened to Iceland. I was asked to explain what had happened. Explained how much I lost. That some of my money had simply disappeared and that my retirement fund was now worth a lot less than it had just 6 months earlier. How much this was going to affect us. The inflation rate, currency exchange and interest rates. That nobody had been arrested for any wrong doing. That not a single government official or surveillance employee had lost their job. That not a single person in any sort of position of authority had stepped forward to apologize for their mistakes. What surprised my friends in Hong Kong and others I spoke with, was that until then the protests had been very civilized. Some meetings with speeches. But very little else. No serious riots. No burning cars or broken windows. My friends wondered what caused this.
Given the situation as it stands right now. Where a huge number of people are faced with a couple of very uncomfortable facts. That the place where they live is actually decreasing in value, while the loans they are paying are rising fast. Just after returning I heard an example of this. Just over a year ago. A person had decided to invest in their own place to live. It cost at the time 30 million ISK. This person paid out 5 million in cash. Took a loan for 25 million in foreign currency. After all, everyone was told that it was crazy to take on loans in ISK. There might be some currency fluctuations, but low interests rates should more than make up for that. It was simply crazy to imagine that the currency would be allowed to fluctuate all that much. Right now the family home is valued at 27 million. But the loan is currently at 50 million. Now add to this the fact that somewhere close to 12.000 people (remember that's up from nearly none) are currently looking for work. That a huge number of people lost their work some 3 months ago and are just now waking up to the fact, that their next paycheck isn't going to cover their expenses and that it's unlikely that the situation is going to change any time soon. It shouldn't come as a surprise to anyone. Except maybe the people who are most isolated from all of this. That things are starting to get a lot more heated.
I'm not surprised. It was amazing to get a chance to spend a couple of weeks among friends. To forget for a moment the serious situation right here. To enjoy great food, excellent company and learn from people who've actually been faced with similar events and even worse. Things aren't just bad here in Iceland. They are bad all over. But I also realized how little responsibility the Icelandic elite has taken for what just happened. The total and utter collapse of the Icelandic financial system, the emergency laws and the steady stream of revelations about dubious deals. What's even more amazing is that it appears like it's more or less all the same people who are in control within the new financial institutions. On top of that the Icelandic government has ensured that I can't even open an account outside of the country. Right now there are such heavy restrictions in place on the movement of foreign currency that foreign investors aren't even allowed to invest in the Icelandic economy. So the people who brought us into this mess. Most of whom don't seem to be exactly suffering, seem to be surprised that people have just about had enough of the situation.
Yesterday thousands of Icelanders of all ages gathered together in front of the longest parliament in the world (established way back in 930). They blew whistles, banged pots and pans. Threw snowballs and did their very best to make the first meeting of the parliament after Christmas realize that something unique was happening. No formal political party had called upon people to make their voices heard. This was a pure form of grassroots activity. Facebook, SMS, blogs had been used to communicate this idea. The Icelandic police were completely taken by surprise. Unfortunately they lost control of the situation and were eventually forced to bring on the OC gas. This proved ineffective in breaking up the protests. Fires where lit and it wouldn't be until late at night that the protesters where driven away. Today we saw the crowds return. People are angry and parliament decided to postpone it's previously advertised meeting today. When the protesters discovered that in the church next door family and friends were grieving the loss of a loved one. They all left and didn't start up their protest until after the family had left. What a civilized bunch of protesters. They would head for the office of the prime minister and for the first time in decades the police had to escort the prime minister from his office. This hasn't been seen here since 1931 and back then we belonged to Denmark. This time around we can't blame the Danes for our problems.
The bleak fact of the matter is that we're faced with some amazingly bad economic news. People are losing their jobs. Prices are going up. There's a steady stream of news that seem to show that a small group of interconnected people have abused the public trust. There are cutbacks being announced in social services. Lots of people are being asked to accept a reduction in their paycheck at exactly the same time as expenses are going up. These are the kind of circumstances that call for drastic action. But the demands from the crowds seem to be simple enough. They are calling for elections. Our dearly beloved leaders seem to think that this might mean crisis. I wonder how they would define the current situation.
Given the situation as it stands right now. Where a huge number of people are faced with a couple of very uncomfortable facts. That the place where they live is actually decreasing in value, while the loans they are paying are rising fast. Just after returning I heard an example of this. Just over a year ago. A person had decided to invest in their own place to live. It cost at the time 30 million ISK. This person paid out 5 million in cash. Took a loan for 25 million in foreign currency. After all, everyone was told that it was crazy to take on loans in ISK. There might be some currency fluctuations, but low interests rates should more than make up for that. It was simply crazy to imagine that the currency would be allowed to fluctuate all that much. Right now the family home is valued at 27 million. But the loan is currently at 50 million. Now add to this the fact that somewhere close to 12.000 people (remember that's up from nearly none) are currently looking for work. That a huge number of people lost their work some 3 months ago and are just now waking up to the fact, that their next paycheck isn't going to cover their expenses and that it's unlikely that the situation is going to change any time soon. It shouldn't come as a surprise to anyone. Except maybe the people who are most isolated from all of this. That things are starting to get a lot more heated.
I'm not surprised. It was amazing to get a chance to spend a couple of weeks among friends. To forget for a moment the serious situation right here. To enjoy great food, excellent company and learn from people who've actually been faced with similar events and even worse. Things aren't just bad here in Iceland. They are bad all over. But I also realized how little responsibility the Icelandic elite has taken for what just happened. The total and utter collapse of the Icelandic financial system, the emergency laws and the steady stream of revelations about dubious deals. What's even more amazing is that it appears like it's more or less all the same people who are in control within the new financial institutions. On top of that the Icelandic government has ensured that I can't even open an account outside of the country. Right now there are such heavy restrictions in place on the movement of foreign currency that foreign investors aren't even allowed to invest in the Icelandic economy. So the people who brought us into this mess. Most of whom don't seem to be exactly suffering, seem to be surprised that people have just about had enough of the situation.
Yesterday thousands of Icelanders of all ages gathered together in front of the longest parliament in the world (established way back in 930). They blew whistles, banged pots and pans. Threw snowballs and did their very best to make the first meeting of the parliament after Christmas realize that something unique was happening. No formal political party had called upon people to make their voices heard. This was a pure form of grassroots activity. Facebook, SMS, blogs had been used to communicate this idea. The Icelandic police were completely taken by surprise. Unfortunately they lost control of the situation and were eventually forced to bring on the OC gas. This proved ineffective in breaking up the protests. Fires where lit and it wouldn't be until late at night that the protesters where driven away. Today we saw the crowds return. People are angry and parliament decided to postpone it's previously advertised meeting today. When the protesters discovered that in the church next door family and friends were grieving the loss of a loved one. They all left and didn't start up their protest until after the family had left. What a civilized bunch of protesters. They would head for the office of the prime minister and for the first time in decades the police had to escort the prime minister from his office. This hasn't been seen here since 1931 and back then we belonged to Denmark. This time around we can't blame the Danes for our problems.
The bleak fact of the matter is that we're faced with some amazingly bad economic news. People are losing their jobs. Prices are going up. There's a steady stream of news that seem to show that a small group of interconnected people have abused the public trust. There are cutbacks being announced in social services. Lots of people are being asked to accept a reduction in their paycheck at exactly the same time as expenses are going up. These are the kind of circumstances that call for drastic action. But the demands from the crowds seem to be simple enough. They are calling for elections. Our dearly beloved leaders seem to think that this might mean crisis. I wonder how they would define the current situation.
Ummæli