toblin
March 9, 2009, 1:05pm
1
<p>Another great article from Michael Lewis. This time he looks at Iceland and the self imposed disaster that will haunt its future generations. </p>
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Icelands de facto bankruptcyits currency (the krona) is kaput, its debt is 850 percent of G.D.P., its people are hoarding food and cash and blowing up their new Range Rovers for the insuranceresulted from a stunning collective madness. What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power? In Reykjavík, where men are men, and the women seem to have completely given up on them, the author follows the peculiarly Icelandic logic behind the meltdown.
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Global financial ambition turned out to have a downside. When their three brand-new global-size banks collapsed, last October, Icelands 300,000 citizens found that they bore some kind of responsibility for $100 billion of banking losseswhich works out to roughly $330,000 for every Icelandic man, woman, and child.
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<p>[url=<a href=“http://www.vanityfair.com/politics/features/2009/04/iceland200904]Link[/url ”>Wall Street on the Tundra | Vanity Fair ]Link[/url</a>]</p>
<p>Well-written and enjoyable to read in the abstract.</p>
<p>If it were up to me we would send everyone on Wall Street to an ice flow in the arctic and let global warming do its thing. Then start over with a new banking system and culture.</p>
<p>I may have to agree with you on that, Barrons!</p>
<p>This passage illustrates the thinking beautifully and could, I think, apply to WAll Street as well as Iceland:</p>
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You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets. “They created fake capital by trading assets amongst themselves at inflated values,” says a London hedge-fund manager. “This was how the banks and investment companies grew and grew. But they were lightweights in the international markets.”
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<p>Internet companies did this to inflate their sales numbers in the late 1990s. Looks like the idea got recycled by investment banks.</p>
<p>I’m up for that, barrons. </p>
<p>How Iceland decided they have enough assets to actually be a major financial power is completely beyond me. They live on an island in the middle of the North Atlantic.</p>