The genie, the gin, the gold and the goat

You’re stuck in Iceland after Geir Haarde’s economic management has made everyone else leave and there are no flights or boats to and from the country. There is no food left and you roam the concrete streets of Gardabaer. You have no idea if anyone will ever find you. You are stuck on a desert island.

Then all of a sudden you find what appears to be an empty bottle of gin, but as everyone knows all the gin in the country was consumed with tonic before 2008.

You throw the bottle away but out comes a genie and offers you a choice, a ton of gold or a single goat.

And you find yourself struggling to decide which option is really of more value to you.

Warren Buffet says that he cannot understand the value of gold. It is dug out of a hole in a different country, flown across an ocean, dug back into a man-made hole where somebody is paid to watch it. Yet, people all over the world are flocking towards buying into this expensively guarded mineral.

But what the value of things in Iceland right now?

A year ago your house gave you shelter. And it does so today as well. But it is costing you almost twice as much to stay there today than a year ago. And if you want to sell it to someone you will get half the money than if you sold it a year ago.

Does it make sense to let bubbles form in housing-markets? Why didn’t anybody stop all the municipalities in and around Reykjavik allocating more building permits than demand requested? They sold land like there was no tomorrow. And now it seems like there is no tomorrow for everyone who bought their first home in the last few years.

What is the value of the krona? We know why we have money. So that we can allocate value to things and easily facilitate exchange of goods and services. But in a globalized world, is there really any need for different currencies? Is the real value of a bottle of gin different to a guy in Australia or in Iceland when transportation has been taken into account?

Or is the Icelandic krona just an economic tool? Not to provide a country with a sound and secure system but so that speculators and those well-connected can get filthy rich manipulating. And distorting the real value of things in the process.

Which would you rather have, the bottle of gin, the ton of gold or the goat if you were stuck on a desert island? Or would you maybe rather have credit default swaps(CAD’s)?


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