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[bob ford <bobford79 AT yahoo.com>]

I posted some stuff a couple of months ago, based on things a person on 
another forum was tellinmg about his homeland in Iceland.  This article is in 
today's NYT.

  One thing the author of this article got wrong was the conversion rate of 
the Krona to the USD.  It has officially doubled as the article says.. But, 
that is strictly a gov't conversion rate, and they strictly ration USD and 
other foreign currencies to people traveling out of the country.  The real 
conversion rate is whatever the black market will bear.

  These are very civilized people in Iceland.  No looting, no burning, no 
violence at all.  If it gets close to this bad in U.S., and I think it will,  
???? ......bobford


----------------------------------------------------------------------


 
By SARAH LYALL

Published: November 8, 2008 

REYKJAVIK, Iceland — The collapse came so fast it seemed unreal, impossible. 
One woman here compared it to being hit by a train. Another said she felt as 
if she were watching it through a window. Another said, “It feels like you’ve 
been put in a prison, and you don’t know what you did wrong.” 

This country, as modern and sophisticated as it is geographically isolated, 
still seems to be in shock. But if the events of last month — the failure of 
Iceland’s banks; the plummeting of its currency; the first wave of layoffs; 
the loss of reputation abroad — felt like a bad dream, Iceland has now 
awakened to find that it is all coming true. 

It is not as if Reykjavik, where about two-thirds of the country’s 300,000 
people live, is filled with bread lines or homeless shanties or looters 
smashing store windows. But this city, until recently the center of one of 
the world’s fastest economic booms, is now the unhappy site of one of its 
great crashes. It is impossible to meet anyone here who has not been 
profoundly affected by the financial crisis. 

Overnight, people lost their savings. Prices are soaring. Once-crowded 
restaurants are almost empty. Banks are rationing foreign currency, and 
companies are finding it dauntingly difficult to do business abroad. 
Inflation is at 16 percent and rising. People have stopped traveling 
overseas. The local currency, the krona, was 65 to the dollar a year ago; now 
it is 130. Companies are slashing salaries, reducing workers’ hours and, in 
some instances, embarking on mass layoffs. 

“No country has ever crashed as quickly and as badly in peacetime,” said Jon 
Danielsson, an economist with the London School of Economics. 

The loss goes beyond the personal, shattering a proud country’s sense of 
itself. 

“Years ago, I would say that I was Icelandic and people might say, ‘Oh, 
where’s that?’ ” said Katrin Runolfsdottir, 49, who was fired from her 
secretarial job on Oct. 31. “That was fine. But now there’s this image of us 
being overspenders, thieves.” 

Aldis Nordfjord, a 53-year-old architect, also lost her job last month. So 
did all 44 of her co-workers — everyone in the company except its owners. As 
many as 75 percent of Iceland’s private-sector architects have probably been 
fired in the past few weeks, she said.

In a strange way, she said, it is comforting to be one in a crowd. “Everyone 
is in the same situation,” she said. “If you can imagine, if only 10 out of 
40 people had been fired, it would have been different; you would have felt, 
‘Why me? Why not him?’ ”

Until last spring, Iceland’s economy seemed white-hot. It had the 
fourth-highest gross domestic product per capita in the world. Unemployment 
hovered between 0 and 1 percent (while forecasts for next spring are as high 
as 10 percent). A 2007 United Nations report measuring life expectancy, real 
per-capita income and educational levels identified Iceland as the world’s 
best country in which to live.

Emboldened by the strong krona, once-frugal Icelanders took regular shopping 
weekends in Europe, bought fancy cars and built bigger houses paid for with 
low-interest loans in foreign currencies. 

Like the Vikings of old, Icelandic bankers were roaming the world and 
aggressively seizing business, pumping debt into a soufflé of a system. The 
banks are the ones that cannot repay tens of billions of dollars in foreign 
debt, and “they’re the ones who ruined our reputation,” said Adalheidur 
Hedinsdottir, who runs a small chain of coffee shops called Kaffitar and 
sells coffee wholesale to stores.

There was so much work, employers had to import workers from abroad. Ms. 
Nordfjord, the architect, worked so much overtime last year that she doubled 
her salary. She was featured on a Swedish radio program as an expert on 
Iceland’s extraordinary building boom. 

Two months ago, her company canceled all overtime. Two weeks ago, it 
acknowledged that work was slowing. But it promised that there would be 
enough to last through next summer. 

The next day, everyone was herded into a conference room and fired. 

Employers are hurting just as much as employees. Ms. Hedinsdottir has laid 
off seven part-time employees, cut full-time workers’ hours and raised 
prices. The Kaffitar branch on Reykjavik’s central shopping street was 
perhaps half full; in normal times, it would have been bursting at its seams. 

While business is dwindling, costs are soaring. When the government took over 
the country’s failing banks in October, Ms. Hedinsdottir’s latest shipment of 
coffee — more than 109,000 pounds — was already on the water, en route from 
Nicaragua. She had the money to pay for it, but because the crisis made 
foreign banks leery of doing business with Iceland, she said, she was unable 
to convert enough cash into foreign currency. 




“They were calling me every day and asking me what the situation was, and 
they got really nervous,” Ms. Hedinsdottir said of her creditors. They got so 
nervous that they sent the coffee to a warehouse in Hamburg, Germany, where 
it now sits while she tries to find the foreign currency to pay for it.

Her fixed costs are no longer fixed. Five years ago, the company built a new 
factory, borrowing the 120 million kronur — about $1.5 million — in foreign 
currencies. But the currency’s fall has increased her debt to 200 million 
kronur. This summer, her monthly payments were 2.5 million kronur; now they 
may be double that — the equivalent of $38,500 in Iceland’s debased currency. 

“My financial manager is talking to the banks every day, and we don’t know 
how much we’re supposed to pay,” Ms. Hedinsdottir said. 

In a recent survey, one-third of Icelanders said they would consider 
emigrating. Foreigners are already abandoning Iceland. 

Anthony Restivo, an American who worked this fall for a potato farm in 
eastern Iceland and was heading home, said all of the farm’s foreign workers 
abruptly left last month because their salaries had fallen so much. One man 
arrived from Poland, he said, then realized how little the krona was worth 
and went home the next day. 

At the Kringlan shopping center on the edge of Reykjavik, Hronn Helgadottir, 
who works at the Aveda beauty store, said she could no longer afford to 
travel abroad. But the previous weekend, she said, she and her husband had 
gone for a last trip to Amsterdam, a holiday they had paid for months ago, 
when the krona was still strong. 

They ate as cheaply as they could and bought nothing. “It was strange to 
stand in a store and look at a bag or a pair of shoes and see that they cost 
100,000 kronur, when last year they cost only 40,000,” she said. 

In Kopavogur, a suburb of Reykjavik, Ms. Runolfsdottir, the recently fired 
secretary, said she had worried for some time that Iceland would collapse 
under the weight of inflated expectations. 

“If you drive through Reykjavik, you see all these new houses, and I’ve been 
thinking for the longest time, ‘Where are we going to get people to live in 
all these homes?’” she said.

The real estate firm that used to employ Ms. Runolfsdottir built about 800 
houses two years ago, she said; only 40 percent have been sold. 

By Icelandic law, Ms. Runolfsdottir and other fired employees have three 
months before they have to leave their jobs. At the end of that period, she 
will start drawing unemployment benefits.

Meanwhile, her husband’s modest investment in several now-failed Icelandic 
banks is worthless. “They were encouraging us to buy shares in their firms 
until the last minute,” she said. 

She feels angry at the government, which in her view has mishandled 
everything, and angry at the banks that have tarnished Iceland’s reputation. 
And while she has every sympathy with the hundreds of thousands of foreign 
depositors who may have lost their money, she wonders why the Icelandic 
government — and, in essence, the Icelandic people — should have to suffer 
more than they already have. 

“We didn’t ask anyone to put their money in the banks,” she said. “These are 
private companies and private banks, and they went abroad and did business 
there.” 

Despite all this, Icelanders are naturally optimistic, a trait born, perhaps, 
of living in one of the world’s most punishing landscapes and depending for 
so much of their history on the fickle fishing industry. The weak krona will 
make exports more attractive, they point out. Also, Iceland has a highly 
educated, young and flexible population, and has triumphed after hardship 
before. 

Ragna Sara Jonsdottir, who runs a small business consultancy, said she had 
met for the first time with other businesses in her office building. “We sat 
down and said, ‘We all have ideas, and we can help each other through 
difficult times,’ ” she said. 

But she said she was just as shocked as everyone else by the suddenness, and 
the severity, of the downturn. When the prime minister, Geir H. Haarde, 
addressed the nation at the beginning of October, she said, her 6-year-old 
daughter asked her to explain what he had said. 

She answered that there was a crisis, but that the prime minister had not 
told the country how the government planned to address it. Her daughter said, 
“Maybe he didn’t know what to say.” 


http://www.nytimes.com/2008/11/09/world/europe/09iceland.html?pagewanted=2&hp