CollapseIceland on the Edgeof Insolvency and Chaos, 2008-2009

Gudni Jóhannesson, gj@ru.is

“How do you like Iceland?”

“Ah, the bankrupt country...”

“How do you like Iceland?”

“Ah, the bankrupt country...”

“The bad news is that the banks collapsed, but the good news is that now the whole world knows where Iceland is”

What happened in 2008-09?

15-25 September. Storm Clouds. 25-29 September. Tidal Wave. 29 Sept. – 3 Oct. Adrift. 3-6 October. Shipwreck. 6-9 October. Torpedo. 9 Oct.-19 Nov. S.O.S. 19 Nov.-14 Jan. Calm Before the

Storm 14-21 January. Revolt 21-26 January. New Land in

Sight?

15.-25. Sept. Storm Clouds

Three Banks with 85% share: Glitnir Kaupþing (Kaupthing) Landsbanki

Centre-right coalition of Social Democrats and Independence Party

“I think we will see brighter times in a few months’ time”. Landsbanki Bank Manager, 23

Sept. 2008

25-29 Sept. Tidal Wave

“This is the biggest bankrobbery in Iceland’s history and clearly a part of a bigger struggle”. Businessman Jón Ásgeir Jóhannesson, 30

September 2008. “The end is near.”

Unnamed banker, end of September 2008.

29 Sept. – 3 Oct. Adrift

“The króna is third from bottom, with regard to currency strength for the last 12 months. Only the Dollar in Zimbabwe and the Turkmen Manat have fared worse”. Channel Two News, 2 Oct. 2008

“The Icelandic financial system is collapsing”. Gylfi Magnússon, Economics Lecturer,

State Radio News, 3 Oct. 2008

3-6 October 2008. Shipwreck

“There is a serious danger that the whole Icelandic economy could be dragged down with the banks, leading to a state bankruptcy. No responsible regime can allow that to happen. ... May God bless Iceland”. Prime Minister Geir H.

Haarde, 6 October 2008.

6-9 October 2008. Torpedo

6-9 October 2008. Torpedo

“The Icelandic government, believe it or not, have told me yesterday they have no intention of honouring their obligations here”. Alistair Darling, Chancellor, 8 October 2008.

„Brown and Darling, PLEASE PLEASE HELP US.“ Jason in Wokingham, 8 October 2008.

9 Oct. -19 Nov. S.O.S.

“It’s not a sign of weak- ness to ask for help, it’s a sign of weakness not to ask for help. It’s like when your kids have an accident and you don’t call the doctor because you are too proud, you know you just don’t behave like that”. Economic Professor Gylfi

Zoega, 10 October 2008

19 Nov. 2008 - 14 Jan. 2009. Calm Before the Storm

“I´m not sure that you here can speak on behalf of the

nation” (loud boooos...) Foreign Minister Ingibjörg

Gísladóttir, public meeting on the crisis, 24 November 2008.

“This [currency regulations] are very similar to the methods used in the GDR“. “Welcome to East Germany“, www.visir.is 4.

December 2008.

14-21 January 2009. Revolt

“USE-LESS GOVERN-MENT, USE-LESS GOVERN-MENT!” Protest slogan, 20

Jan. and onwards “All back down!

There will be gas, gas, gas!” Police warning at

Parliament, 20 Jan.

21-26 January 2009. New Land in Sight? “Those who can only

protest by throwing bottles and rocks are cowards who can eat shit. It is their fault that the police needs to use force. ... I am “orange”. Let’s continue our protests but stop the violence!” Comment by “Óli” on

Facebook, 22 Jan. 2009

What happened? 1) Collapse of the króna

What happened? 2) Stock market bubble

What happened? 3) Housing bubble

What happened? 4) Super-sized banks

What happened? 5) CDS

What happened? 6) Run on Icelandic banks

Who and what was to blame?

International financial crisis, Capitalism, Greedy and criminal bankers and businessmen, Flawed EU regulations, Generation change in Icelandic business world, Icelandic arrogance, Tiny currency, No assistance from abroad, Overspending by everybody in Iceland, Apathy by banking sector watchdogs, Apathy by the academic community

Looking Back I. International Crisis

“Bad loans” in the USCapitalismThe CapitalistsFaults in the System

Looking Back II. “Útrás”

“Útrás”: “Outvasion”, Expansion, Internationalization

EEAPrivatizationGeneration Change

Looking Back III. Arrogance

Iceland a “world financial centre”Foreign warnings: “envy” and

“ignorance”Masculine, competitive valuesBlindness in the media and the

academic world

Looking Back IV. Negligence

Financial Services AuthorityCentral Bank of IcelandParliament and government

Looking Back V. Excess

“Expand or Perish”Continued growth, despite warning

signs in 2006 Icesave and state guarantee

Looking Back VI. Isolation

No assistance from abroadThe krónaEEA not enough, EU the only way?

Looking Back VII. Lies

Cross-ownershipCronyismDisregard for rules and regulationsTax evasion“Fake transactions”

Looking back VIII. Lavishness

StateCouncils Individuals

Looking ahead. Hope?

Icesave burdenEU or not?Natural resourcesConfidence, yes ... but less

materialism!