The price of being an Icelander

A week before the first bank went down in Iceland I commented on a popular blog that young people in Iceland now either face exodus or a prison of debt. I ended up on political talk show Silfur Egils because of that and tomorrow I am going back unless someone more interesting becomes suddenly available.  

Things have now gotten worse. 

Those young people who went all out in the good times are facing bankruptcy. Those who bought cars and homes that stretched their budgets are living day by day now. Those who borrowed in foreign currency can not afford to miss a single payday. Many are resigned.  

That is bad enough, but normal. Take risks and you might get knocked. 

But what is worse  is the fact that young people who were careful and did not go all out are also being crushed. 

A couple with a young child who are models of stability lost a large chunk of their savings in stocks and have seen their two year old, price-indexed home loan rise beyond anything reasonable. 

A young professional who poured all her savings into her home loan at the time of the crash then lost her job and her employer started all over under a new social security number, leaving her contract with the bankrupt one. No payments, no savings, no available jobs, a price-indexed home loan that has devoured her savings already. 

A young mother who called her bank a week before the crash to sell her money market fund and was convinced that she shouldn’t. 

A student abroad who has seen the price of her education almost double in the span of a few months and cannot continue on the track she had chosen. Her home loan in Iceland rising while her tenants are moving out and the rent-market is crashing. 

There is no relief from the government. The only options they have offered are extending loans, i.e. extending the noose. The only visible job-creation is the miniscule and unprofitable business of whaling.  

The US thinks it is in a dark and stormy place. They should try to be price-indexed to death. When I compare my financial situation at the age of 33 with my college friends from the States,  I have been paying an arm and a leg for the special priviledge of betting on Iceland as a place to live and work.

Taking into account that I have been on decent wages for the past five years, price indexation has made sure that every time I am almost in a good place I am brought back to Icelandic reality and asked to pay more. Having worked two jobs forever and paid all my bills, they still keep rising way beyond what anyone should tolerate. Just because of wicked marriage of price-indexation and bad governance. 

For the price you are asked to pay to be an Icelander, is sure does not seem to be worth it. The options are still as limited as before, an exodus or a prison of debt.


1 Response to “The price of being an Icelander”

  1. 1 Vilhjalm A. March 1, 2009 at 10:38 am

    These Icelandic laws are terribly unfair. As you probably know, in the US most mortgages are non-recourse, so house buyers who can’t pay mortgages or are underwater can simply walk away from the houses. Not in Iceland.
    The bankruptcy rules were changed a few years ago to make it harder but you can still get out of bankruptcy within 3 years. Not in Iceland.
    It could be worse, though. In Dubai if you go into debt you really doo have to go to prison. In Hungary, you can’t walk away from mortgage debt and the debt actually passes along to your children. Ouch.
    I am thinking of establishing a new internet business, similar to ebay. Persons from various counties could exchange identities, personal histories, and citizenships. So debtors like Jon and Gunnar could become Lazlo and Atilla and vice versa. The Hungarian police are not likely to come to Iceland. Or a market for death-bed adoptions. Old and very sick people adopt young debtors and take over their unpayable mortgages, in exchange for some flowers and payments to the pensioners’ kids.
    This is the new “new economy”, after all. You have to think “outside the box”.

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