Archive for December, 2008

Police fighting protesters in Reykjavik

A New Years Eve tradition is an extremely boring talk show where the leaders of the parties in parliament gather to discuss the year at its end.

Two days ago word spread that protesters would appear outside the downtown hotel where the talk show has traditionally been held.

Channel 2 knew about this and wasn´t going to miss this great chance of historic television.

Of course the protests got out of hand. Right after Valgerdur Sverrisdottir, head of the Progressive Party and one of those who handed the banks to the politically connected businessmen had said that it had all been proven to be beyond doubt, when it hasn´t and Ingibjorg Solrun Gisladottir, foreign minister repeated her words about those who protested not being representatives of the nation, all hell broke loose.

A “disgraced” Sigmundur Ernir Runarsson, host of the talk show told how they had to cut the show after equipment had been damaged.

He must have been smiling on the inside because this was the most interesting New Years show ever. Fantastic television.

Violence should always be abhorred. But the government has been fortunate so far as the nation has shown them incredible patience in the twelwe weeks since the economic collapse. As I have predicted several times before on this site, this is what will happen if people don´t see any sort of reconciliation, which so far has been non-existent.

No resignations by politicians, no lawsuits against the businessmen who owned the banks, no action when those who bankrupted Iceland´s largest companies are allowed to buy them back for a fraction. When those who are elected to lead show extreme lack of action, they are bound to eventually face extreme actions by fed up citizens.

It all leads to people having no trust in the society the live in. And that is when things that have gone terribly wrong take a turn for worse.

The year of the fall

Photo from 123.is/jobbioggummi

Photo from 123.is/jobbioggummi

The Independent Party and the Progressive Party privatized the national banks in the beginning of the century.

When Bunadarbankinn was handed to Progressive Party members on a silver platter by Valgerdur Sverrisdottir and Halldor Asgrimsson, the Independent Party´s David Oddson and Geir Haarde felt the need to hand Landsbankinn to Independent Party favorites Bjorgolfur Gudmundsson and Bjorgolfur Thor.

No one in those groups had any experience of running big international financial institutions. Within five years Bunadarbankinn had become Kaupthing, one of the world´s 100 largest banks and one of the 700 largest companies in the world.

It seemed like magic, it turned out to be sorcery.

Bjorgolfur Gudmundsson, Bjorgolfur Thor, Agust Gudmundsson, Lydur Gudmundsson, Jon Asgeir Johannesson, Olafur Olafsson, Finnur Ingolfsson, Karl Wernerson, Robert Wessman, Palmi Haraldsson, Hannes Smarason abused the power that came with owning a bank to purchase the rest of Iceland, and expensive acquisitions abroad with loans from their own banks. Bjarni Armannson, Larus Welding, Jon Sigurdsson, Hreidar Mar Sigurdsson, Sigurdur Einarsson, Ingolfur Helgason, Sigurjon Arnason and Halldor J. Kristjansson made this possible as CEO´s.

There was no competition, but pure oligarchy in Iceland.

The Independent Party, the Progressive Party and Samfylkingin turned a blind eye. Members of parliament got special treatments within the banks. The Financial Authority was crippled by limp Independent Party management.

The Left/Greens have failed as an opposition leaders for offering extreme solutions where sensible ones are needed.

The Liberals have cemented themselves as anything but sensible.

Iceland´s ruin has been extreme. The International Monetary Fund describes it as the worst in history, compared to the size of the economy.

No reconciliation has been made. None is apparant on the horizon.The politicians stay put in their offices. The businessmen are dumping debt inside the nationalized banks and buying their companies back for change.

The great battle of our time is at its beginning. The one between citizens and political parties.

Happy new year!!!

The poisoned chalice

No one applied for the job of Special Attorney who is supposed to investigate the fall of the Icelandic banks.

It might become a poisoned chalice for the person who would take the job. He/she would have to declare all of his/her connections to polticians, businessmen etc, as well as financial connections.

Goes to show how difficult it is to speak up in a small country where everybody knows your name.

The King is dead

Burger King is dead… in Iceland.

The fast food giant will shut its doors after today, its managing director saying that the current economic situation has made its operation unbearable.

Landsbankinn loved to party, with the Independent Party

The Althingi ombudsman has reprimanded Geir Haarde for hiring Bjorn Runar Gudmundsson from Landsbankinn to head the new position of managing director of Office for Economic and International Finance.

This is as people are noticing the pattern within Landsbankinn where Independent Party members were shoe-ins for top positions. Sigurjon Arnason CEO, Atli Atlason Head of Human Resources and Viggo Asgeirsson Head of Marketing. Thorlindur Kjartansson and Erla Osk Asgeirsdottir were the most high-profile of a host of members of the Association of Young Independent Party Members and members of deiglan.com, a webzine linked closely with the party.

The director of the board was Kjartan Gunnarsson, who was also managing director of the Independent Party. The owners were Bjorgolfur Thor and Bjorgolfur Gudmundsson who were handed the bank by David Oddson and Geir Haarde in the privatization of 2003 in spite of having the lowest offer. It caused such disappointment with one of the members of the privatization committee that he resigned. It was a well known fact in the banking world that you had to be a member to have a better chance of a good job at Landsbankinn.

Other banks were wary of the relationship. It came as a shock one day in 2005 to see Landsbankinn and the Student Loan Organization announce a new service in the bank where students could get student loans without someone guaranteeing them. Managing the student products at Kauphting I called the Student Loan Organization and asked why other banks on the free market had not been offered this opportunity from the official agency. The answer revealed that they had tried to let other banks know about it. The way they did it guaranteed that they wouldn´t. Landsbankinn got a photo opportunity with the head of the Student Loan Organization, an Independent Party official and the head of the Student´s Association at the University of Iceland, the wife of the marketing manager of Landsbankinn…and Independent Party member. The fund´s annual report even celebrates this milestone agreement with the bank and touts its meaning for students. Other banks had all copied the service by then, but Landsbankinn got the bragging rights in the market of being first.

Why this public institution did not announce such big news with all the banks did not come as a surprise.

We should also remember after the closing of markets on June 19, the government announced extensive new plans in the housing and financial markets. Landsbanki CEO Halldor Kristjansson sent an email to members of the board of the Association of Banks and Financial Institutions which proved that he knew about the plans before they were announced.That same day Landsbankinn traded heavily in housing bonds, making a handsome profit.

Could have been

All of this pain could have been averted if a sound monetary system were used.  Any recovery will be greatly hindered unless a sound monetary system is used.

From Run to Gold

The emperor´s new clothes

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From Aftenposten

Looking back on 2008 II: What is an Icelander?

What is an Icelander?

A viking? A workaholic? An elf?

A bookworm? A strongman? A beauty queen?

A musician? A poet? A person of the sea?

All nations have stereotypes that are either promoted within their country or those outside it.

The French think of themselves as bon vivants, the Americans call them lazy.

The Americans think of themselves as leaders of the world, the French think they are bullies.

Latin Americans think they have more passion than anyone else. Nobody is supposed to be more hardworking than Asians.

Invariably foreigners are struck by an encounter with an extravagant German or a lazy Japanese. They don’t conform to the image.

In many ways the characteristics of a nation help it find its way as a whole. You emphasize the qualities you want to be associated with.

In Iceland Björk is revered as she is an original that portrays the best in our culture. So are Sigur Ros and Eidur Gudjohnsen.

Hard-working, poetic, strong and beautiful (have you seen Eidur play ball?).

In the last eight years Icelanders have worked hard at creating a new image which finally was revealed to the world in 2008.

An Icelander is the guy who buys the biggest SUV on credit, then parks in the handicapped spot.

leggja1

And there is nothing more Icelandic than this police car…

leggja2

Photos from here

Looking back on 2008 # 1: The Icelandic culture war begins

Iceland is a young country. Our institutions and culture are relatively new and in almost all cases borrowed from other cultures. We have never had to figure out for ourselves why we want a particular judicial system or political system. It has just been copied from abroad. Our political parties copy their ideology from parties in USA, Britain and Scandinavia. We haven’t experienced class-division on the scale other nations have until recently and haven’t asked ourselves how to deal with it. We don’t know our place in the world, whether we should make friends or what kind of friends. In 2008 there were even some who thought it would be a viable option to isolate ourselves.

Christmas time in Iceland means a lot of Christmas parties, where you get to meet everyone from your extended family to friends. Conversation invariably turns to politics but this year seemed different. People seemed reluctant to discuess the main issues of our times, at the end of what has been the most extraordinary year in Iceland’s political and economic history.

The reason seems straightforward. Many are still in shock. There are so many that have lost their jobs and are confused about the future. So many others are afraid of losing theirs in 2009 and everyone is facing financial uncertainty. People have lost their savings, their loans have skyrocketed and purchasing power is down.

Dig deeper and you will find a bitterly diveded country. Those who did browse on the subjects at the Christmas parties would find gaps that seem today to be unbridgeable. The gaps are generational and ideological.

The younger generations, under the age of 40 are as a whole facing the worst crisis. They have been on the property ladder for a short time in which inflation has chewed up the equity on their homes. They have been losing their jobs in the largest number and are having a hard time finding new ones, in many cases while raising young children. These generations are not so forgiving of the politicians or businessmen who have run the country for the last twenty years.

There is a profound danger that if there will be no reconciliation of the economic crash, that if no politicians take responsibility and no businessmen are accused in court then these generations will lose their faith in the system and in the idea of Iceland as a just and fair country. Where they see Sweden’s ministers resign for using the government’s credit-card to buy diapers for her child and Bernard Madoff being hauled off to jail with his assets being frozen, they see Iceland’s ministers sitting steadfastly after the collapse of the banking system and the businessmen who created the mess being allowed to purchase their companies back leaving the debts in nationalized banks. This generation is angry and waiting for answers.

The generations between the ages of 40 and 60 are as a whole in a different situation. They purchased their homes for a fraction of what they are worth, even after the crash. They have been able to invest a bit, sell their businesses if the owned any and are not facing liquidity problems on the scale of younger families. They might have lost savings and in some cases their companies but seeing the younger generation talking to these genarations about the situation is like watching two different sets of alien civilizations try to communicate. They do not seem to understand where the other is coming from.

The ideological gap is even more delicate and proves that good arguments can be destroyed with total nonsense. When people say they think the government should resign because they were at the steering wheel of an economic car crash they are accused of being communist. Just because on the other end of the scale from the Independent Party you will find the Left/Greens and people cannot seem to think outside of those two boxes.

When people say they think that the government opposition should also retire because they have been in parliament for decades without shaking the boat then they are accused of being capitalistic pigs. So therefore people seem to have stayed away from debating the issues at their Christmas parties because they know that nonsense is currently the winner in the important arguments of our lives. Debates are stuck in the cold war between the ideas of communism and capitalism.

Destroying your family gatherings is probably not what we need at this point in time. But we have to face the music sooner than later and start facing our problems. Because as a nation we are the drunk uncle who has passed out in his Armani suit, bought on credit, who is not taking any steps towards recovery. We need to think long-term instead of short-term and we need to listen to ideas instead of only dispensing spin.

It has long been a popular past-time in Iceland to ridicule the politics of the USA, where partizan and ideological wars have raged for the past decades, the so-called “culture wars”. Eventually, even Americans got a bit tired and elected a new kind of politician who ran on promise of change and inclusiveness.

But in Iceland, the culture wars are only beginning.

Pop Quiz: Finance Ministers of the World

What sort of Finance Minister would approve of a 14 billion ISK bailout of Savings and Loan institutions after being one of their shareholders who paid themselves 13 billion ISK in “advanced dividends” this summer?

a) Mickey Mouse
b) Tony Soprano
c) Arni Mathiasen
d) All of the above

Those who get the correct answer are rewarded with higher taxes, more unemployment and inflation off the charts.



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