Iceland

Iceland

Via Paul Kedrofsky, here’s a gorgeous and heartbreaking account of economic collapse in Iceland:

“Trust in the banks had evaporated and people were trying to find a safe haven for their cash. One man had waited for six hours in a bank while his life savings, more than 1m pounds in kronur (at IKr200 to the pound), were counted out in cash in front of him. “I feel like an innocent man dragged from his bed, put in a barrel and hurled over Gullfoss!” wrote one journalist that morning. “We have been brought down by a handful of men who bet our nation’s wealth, fame and prosperity on a throw of the dice.” Gullfoss is one of Iceland’s tourist attractions — a majestic 100ft waterfall.

On collecting our daughter from her handball practice, I learnt the news that her club could not obtain the foreign currency it needed to release their new team shirts from customs. The city’s myriad sports teams rely on local sponsors and our daughter also brought the news that this source of funding for her team was likely to dry up in the months to come. Later that evening, Skype, our communications lifeline, would not renew our credits with an Icelandic credit card. E-mails began to arrive from friends overseas, alarmed by news reports and asking if we were all right.

But all this was trivial compared with the financial distress, in some cases ruin, that now faces a significant proportion of the population.”

The crisis in context:

“For Icelanders, the golden years were the early years, shortly after the land was settled in the ninth century. The Viking tradition, the Althing — the legislative assembly dating to 930 — and the literary canon of Sagas and Eddas are the nation’s cultural bedrock. But after that, Iceland almost disappears from the history books. While the agricultural revolution, the Renaissance, the industrial revolution came and went, while the fine cities of Europe were being built, while artists from Michelangelo to Mozart were pouring forth their creations, while the great inventions and discoveries were being invented and discovered, Icelanders were hunkering down in their turf houses, meeting the hardest challenge of all — survival.

They survived plague, famine, earthquakes and volcanoes. There were times when some even considered abandoning the island. But they stayed on. They stayed and survived. Icelanders will tell you that only the fittest survived, but that is only half the story, because survival requires another key attribute: stubbornness. And Icelanders have it in spades. It is a national trait, and they view it not as a weakness but as a virtue. It comes from experiencing hardship and enduring it. It means finding satisfaction in a simple task done well and sticking to it; finding comfort and solace in family and kinship and being bound by those familial bonds and duties. And perhaps most important of all, it means believing in the independence of the individual as part of the fabric of nationhood, and fighting for that independence. Put simply, the country has values.

And this is what sets this catastrophe apart from the earthquakes and plagues of former years. This is a man-made disaster and worse still, one made by a small group of Icelanders who set off to conquer the financial world, only to return defeated and humiliated. The country is on the verge of bankruptcy and, even more important for those of Viking stock, its international reputation is in tatters. It hurts. (…)

We live now in a foreign-currency lockdown, and although the government has assured everyone that there are sufficient reserves to buy essentials such as oil, grain and medical supplies for the winter, such assurances only serve to create a further sense of unease in a people who have learnt to take such commodities for granted.”

It’s the best explanation I’ve seen of how it feels to live in a country whose first-world economy has completely melted down. Willem Buiter and Anne Sibert have a good account of what led up to it here. Buiter also has a scary piece about the possible relevance of Iceland’s story to the UK here.

To judge by the stock market, a lot of people seem to think that we are at, or past, the worst of this crisis. I don’t think so.