Fiscal pickle: How Iceland, an insignificant nation of fairy-worshipping fish picklers, helped mess up the global money fest.

September 30th, 2008 link to (permalink)

Paul Krugman writes that Iceland has just had to bail out a domestic bank for nearly a billion dollars, which on a per capita basis is a bigger bailout than the failed $700 billion mother of all bailouts. This piece by Max Keiser, a year ago, uses Iceland as a perfect example of the retarded-debt-craze-asset-bubble that has just bukkaked from a great height over the entire anglo-saxosphere and beyond.

The presenter, Max Keiser may be a nut case, a tabloid version of the higher brow economic Cassandra nut case, Nouriel Roubini. But in the land of the mad, Keiser is king, and we are currently in the land of the mad.

[Dear readers, I am very sorry if you are bored by all this financial stuff, which I assure you, I have absolutely no fucking clue about (just like people who work at investment banks, apparently). Unfortunately, I just can't get enough of it. All those graphs and stats and doomsday scenarios and schadenfreude together - its like a disaster movie made specifically for slightly autistic, embittered beta-male, web nerds, like myself. Perhaps the economy is tanking because, like me, everyone is watching the economy tank rather than working.]

Merci Brice.

tags: business

7 responses so far »

Eric : Sep 30, 2008 at 9:32 pm

Finance is a fine intellectual pursuit and one would be remiss, or perhaps infected with a bit of slave morality, to balk at a topic that controls everything from the decisions of presidents to the divorce rate in America. I sharpen my mind on finance regularly. Please do not apologize for posting such material. In fact, please post more. But do consider leaving out the pornographic jargon. It is a bit indecent, no?

I have not had time to catch up with your economic history to post an adequate reply in regards to the question of population, wealth creation, and growth. It is in my planner.
Tom Foremski : Sep 30, 2008 at 10:23 pm

No apology necessary, Dave, I love this kind of stuff!
RiskAffine : Sep 30, 2008 at 11:27 pm

Iceland was buoyed by something called the carry trade. they had high interest rates in iceland and lower rates in japan and america. so people would borrow yen @ 1%, sell them for iceland’s currency and buy some icelandic goverment debt @ 9%. The difference is known as positive carry and as long as enough other people engage in the same activity (which they will during economic expansions) the icelandic currency will gain against lower yielding yen/dollar or whatever. hot money will flow into iceland and a lending boom will ensue.

something comes and derails boom, leads to bust. currency loses value as central bank cuts rates and decreasing positive carry. yen rallies v higher yielding currencies and years of carry interest is erased in a day.

classic carry trade imbalance in the era of floating fiat exchange rates.
admin : Oct 1, 2008 at 8:33 am

@Eric. The pornographic jargon was a tough call, but I needed a swearword. It seems that most swearwords are pornographic but most swearwords have been worn out.

When I was a kid if you said ‘fuck’ you went straight to bed, no dinner, no TV. These days fuck is what they say on TV. We need stronger, more offensive, more disgusting words for special occasions like these. Bukkake used as a verb seemed like a particularly revolting and toxic candidate. I’m wincing as I write it, and I only vaguely know what it even means.
Eric : Oct 1, 2008 at 7:31 pm

@admin. You have a point, sort of. But only a vague sense? You know a scholar’s credo: “Look it up?” I wonder if we are losing our sensitivity to indecent language or new words are taking place of the old?

@RiskAffine - do you know of a website with more information on carry trades? I would be much obliged.
RiskAffine : Oct 4, 2008 at 9:07 pm

http://www.marketwisdom.info/glossary/carrytrade.html
or
http://www.investopedia.com/terms/c/currencycarrytrade.asp
Thomas : Oct 7, 2008 at 11:44 am

http://ap.google.com/article/ALeqM5itQzswxi7QzOQgTSZpEYHznhE3wAD93LL6DG0