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Old 10-05-2008, 05:53 PM   #31
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Originally Posted by Zoomerang96 View Post
what kind of things would happen if a country goes bankrupt?
Well, there are quite a few examples from history. Unfortunately, as one would expect, it usually translates into a significantly reduced standard of living for the country's citizens.

Iceland does have one advantage in having its own freely floating currency which they can allow to devalue, hence making its exports more competitive. Hence, the market offers its own solution, of a sort.

That's why I find it quite amusing that some people are speculating that Iceland could join the euro. I don't see that as a panacea for their problems at all.
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Old 10-06-2008, 11:13 AM   #32
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Iceland does have one advantage in having its own freely floating currency which they can allow to devalue, hence making its exports more competitive. Hence, the market offers its own solution, of a sort.
The fish they export will have a larger profit margin, but they import a lot of their food as well- there's not much arable land there. So hyperinflation is a risk. I'm not sure how much the fishing industry could scale up to take advantage of the favorable exchange rate. Their other large export is smelted aluminum, but demand for industrial metals is down due to the global slump. They are at risk of a Argentina-style hyperinflation/crisis imo. I think Iceland (and others) are going through a massive repatriation of assets at this point.
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Old 10-09-2008, 02:48 AM   #33
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Iceland largest bank, Kautpthing, now doesn't provide basic customer service to foreign customers, anymore.


Iceland before has announced they won't cover any foreign liabilities of the banks.
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Old 10-09-2008, 08:46 AM   #34
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They are at risk of a Argentina-style hyperinflation/crisis imo.
I'd say it's already starting. 1 USD now gets you 241.13 ISK (Icelandic krónur). A few days ago, 1 USD = ~115 ISK. A few months ago, it was stable at 1 USD = ~60 ISK.

(I've paid attention, because I've wanted to vacation over there for a long time now.)
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Old 10-09-2008, 11:20 AM   #35
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I'd say it's already starting. 1 USD now gets you 241.13 ISK (Icelandic krónur). A few days ago, 1 USD = ~115 ISK. A few months ago, it was stable at 1 USD = ~60 ISK.
Wow - that's a massive plunge. Tourism should increase now, although it's the low season. When I visited in summer 2005, I remember seeing average entree prices (at the now-Hilton I stayed at) of around $70 - so I ate at a local diner where the entrees cost "only" around $35. Yesterday I guess that $70 entree was down to $40, and maybe it's $20-25 now. It'll be interesting to see if Iceland switches currencies.
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Old 10-09-2008, 11:43 AM   #36
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Well, the exchange rate might be excellent. But on the other hand inflation is really high as well. Furthermore, since food production in Iceland is, for obvious reasons, very low they have to import it very costly. Or, as the Guardian article suggested, they will just go for the basic stuff.

Still, I would love to spend my holidays over there if I could.
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Old 10-09-2008, 12:01 PM   #37
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Well, the exchange rate might be excellent. But on the other hand inflation is really high as well. Furthermore, since food production in Iceland is, for obvious reasons, very low they have to import it very costly. Or, as the Guardian article suggested, they will just go for the basic stuff.
Inflation is high due to the declining currency, but not in dollar terms. I checked prices of some of the same hotels and restaurants I did last time- they are about half the price now in dollar terms (and the dollar is a lot weaker overall since 2005).
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Old 10-09-2008, 02:44 PM   #38
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Ah, ok. Well, as long as the currency is falling in value faster than inflation is increasing you should be better off.
I guess prices for imported food will rise sharply in the coming weeks or even months. It's now up only a little, but that's probably going to change since they are paying so much in foreign currency values.
Very conveniently, Statistics Iceland provides their data in English: Statistics Iceland
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Old 10-09-2008, 02:58 PM   #39
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Iceland's banking system is £35billion in debt - the equivalent of an incredible £116,000 for every man, woman and child on the island, it was revealed today.

With a population of just over 300,000 - less than that of Norwich - a miniscule economy and banks deeply involved in global markets before the meltdown, Iceland is on the bring of national bankruptcy.
It looks like they will have to default and switch to a new currency, IMF and Russian loans, etc. I think I read banks stopped trading the krona today as well.

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I guess prices for imported food will rise sharply in the coming weeks or even months.
Nice restaurants shouldn't be as affected because the actual food cost is a small portion of price - they have huge markups(a few hundred percent) over the food cost. Groceries will definitely be hit harder.
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Old 10-10-2008, 01:20 PM   #40
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Iceland, in Financial Collapse, Is Likely to Need I.M.F. Help

Iceland’s financial system collapsed Thursday, and analysts said it was probably only a matter of time before the country would have to turn to the International Monetary Fund for help, The New York Times’s Eric Pfanner reported.

Such a move, which would make this small island nation the first sovereign state to fall victim to the credit squeeze that began last year, would require it to accept harsh measures to restore fiscal and monetary stability.

Iceland has tried desperately to avoid such a step. But the odds against it grew worse on Thursday when the government took over the last of three major banks and shut down the stock exchange.

Trading in the Icelandic krona ceased, with foreign banks no longer willing to take the currency — even at what seemed like bargain rates.
http://www.nytimes.com/2008/10/10/bu...bk&oref=slogin
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Old 10-13-2008, 02:08 PM   #41
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Looks like Icelanders are in a panic buying mode - sad:

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Icelandic Shoppers Splurge as Currency Woes Reduce Food Imports

Oct. 13 (Bloomberg) -- After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.

``We have had crazy days for a week now,'' said Johannes Smari Oluffsson, manager of the Bonus discount grocery store in Reykjavik's main shopping center. ``Sales have doubled.''

Bonus, a nationwide chain, has stock at its warehouse for about two weeks. After that, the shelves will start emptying unless it can get access to foreign currency, the 22-year-old manager said, standing in a walk-in fridge filled with meat products, among the few goods on sale produced locally.
Bloomberg.com: News
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