Yet another economic car crash

He had been on the job-market since leaving high-school without a diploma ten years ago. He bought a car in 1998, a small Volkswagen that he drove into the ground nine years later. He was a talented salesman who never had a high-paying job, but on the other hand didn’t have any monthly payments apart from rent.

He got a job as a salesman at a bank in 2005, and did really well. Didn’t make big amounts but enough for himself. He spent it on rent, his car and his hobbies. He had some savings. Then the Volkswagen reached the end or the road. He considered his options. He had been passionate about cars his whole life.  A new Volkswagen would cost around 2 million ISK, a shiny two year old Mercedez C240 imported from the US would cost 2.3 million ISK.

He didn’t rush into things. He was 30 now, and he figured monthly payments of 30-40.000 ISK would be very manegable. He found the car and checked into what loans were available. He could get 100% financing through a currency loan for 2.3 million. The car’s market price in Iceland was 3.5 million.

He called two persons in the bank he was working for, one in the analyst department and the other in risk management and asked them for advice. They had both told him that he should take a currency loan. If he could handle fluctuations up to 20-30% in monthly payments then he would be fine. He borrowed the money and got the car in November 2007.

Today the car is worth 3 million ISK on the Icelandic market. The loan is around 5.5 million ISK and the monthly payments have reached around 100.000 ISK. He lost his job last month.

If you ask politicians and business leaders who is to blame for the economic situation in Iceland you will invariably get the answer that we are all to blame. We borrowed too heavily, bought cars and flat-screen TV’s on credit.

It is a distraction, to make you feel guilty about the small pleasures and necessities you want to allow yourself because you belong to the nation that works from dusk to dawn. There a big difference on the other hand when you borrow billions to leverage businesses that you rip apart the goods from in the form of dividends and bonuses, then leave with blanket companies that go bankrupt.

So there is a big difference between him and Bjorgolfur Gudmundsson. He doesn’t hurt anyone else than himself. And he certainly doesn’t run away from the crash site like Hannes Smarason and Bjarni Armannson or tries to play the ambulance like Sigurdur Einarsson and Jon Asgeir Johannesson.

He’s got to live with it, and his life will suffer because of it.

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