Iceland Attack

Via Paul Krugman, reports of a financial speculator attack on Iceland. You've got to figure that Iceland is almost uniquely vulnerable to this kind of thing. It's a rich country, but with a tiny population of only around 300,000 people that still left it with a 2006 PPP-adjusted GDP of just $12 billion. Under the circumstances, lots of individual people and institutions are rich enough to make huge waves in the Icelandic economy if they're so inclined.

Photo of Reykjavík by me, available under a Creative Commons license

Comments

...and the speculators are presumably borrowing from someone, and most likely with dodgy collateral... Bears watching.

Posted by MattF | March 31, 2008 2:41 PM

Re " a financial speculator attack on Iceland"
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Why? If someone trying to corner the market on herring?

Or maybe a submarket on blonds? Yah -- later makes sense. Waste not, want not.

Posted by Don Williams | March 31, 2008 2:43 PM

I guess they should join the EU and adopt the Euro. This is a pretty damn good reason to do that, if you ask me.

Posted by mpowell | March 31, 2008 2:46 PM

I don't know what to say first Vikings, then zombies, and now Bear Sterns and friends. Why does everyone abuse these poor people?

Posted by Felipe | March 31, 2008 3:05 PM

They are Vikings, they haven't been abused by Vikings.

Posted by Matthew Yglesias | March 31, 2008 3:12 PM

I wonder if the governor of Iceland's central bank would inspire more confidence if he owned a comb.

Posted by rah | March 31, 2008 3:14 PM

I guess they should join the EU and adopt the Euro. This is a pretty damn good reason to do that, if you ask me.
They already have their currency pegged at 2 herrings to the Euro, don't they?

Posted by max | March 31, 2008 3:14 PM

"They are Vikings, they haven't been abused by Vikings."

The ethnic stock of Iceland includes both Scandinavians and Celts, IIRC.

According to the FT's recent column on Iceland, interest rates there are at 15% now. So if you have faith in the Icelandic financial system and the long-term value of their currency -- and you can figure out how to buy a CD at an Icelandic bank -- there could be a chance for you to profit from your confidence.

Posted by Fred | March 31, 2008 3:19 PM

The ethnic stock of Iceland includes both Scandinavians and Celts, IIRC.

Apparently comparison of nuclear and mitichondrial DNA establishes that the male ancestors of modern Icelanders were overwhelmingly Nordic, but lots of their female ancestors were Celtic -- presumably picked up by the Viking men in Ireland and the Hebrides.

How many of the women volunteered for the trip is unknowable, but it is a fact that the Vikings raided Celtic lands (among others) for slaves.

Posted by roac | March 31, 2008 3:47 PM

Actually, "viking" is an occupation, not a nationality. The settlers were Norse.

Posted by rea | March 31, 2008 3:51 PM

Matt, you do read A Fistful of Euros for this sort of thing, don't you? We blog outside the euro (or even herring) zone pretty regularly.

Posted by Doug | March 31, 2008 4:15 PM

With global warming, Iceland is the new Florida.

Posted by Tony Adams | March 31, 2008 4:26 PM

a few posters above alluded to these but ...

1) iceland is the new steel/metalurgy capital as they have a cheap source of energy (geothermal). Their economy has grown dramatically but now global recession might be a big damper on growth??

2) Iceland is looking to membership in the EU which, if anything like other entrants to EU, will see interest rates fall dramatically. Anyone holding bonds will probably see dramatic returns when that happens.

Posted by mike c | March 31, 2008 5:23 PM

Great photo!

Posted by rmfarrell | March 31, 2008 5:26 PM

Iceland has not joined the EU because of the EU ban on whaling which Iceland still engages in.

Also, folks in Iceland are not so keen on "foreign investment." Very insular group of people and that language is the most difficult to learn.

Posted by Tim | March 31, 2008 5:42 PM

What's so difficult about Icelandic? It's related to Norwegian, Danish and Swedish (all North Germanic languages descended from Old Norse). Now Finnish is supposed to be difficult to learn...

Posted by mwg | March 31, 2008 6:46 PM

The other Scandinavian languages all dropped a lot of the grammatical complexity of Old Norse (much as English lost most of the complexity of old English). Icelandic has retained a lot of it.

Posted by JonF | March 31, 2008 7:00 PM

They are Vikings, they haven't been abused by Vikings.

An all-too-typical dismissal of the very real problem of Viking-on-Viking violence.

Posted by JB | March 31, 2008 8:34 PM

Sure, harder than Swedish or Norwegian. Does that make it particularly difficult for English speakers compared to, say, Finnish or Mandarin?

Posted by mwg | March 31, 2008 8:40 PM

1. I'm not sure how much adopting the Euro would help. It would stabilize the currency, but speculation could still cause commodity prices to skyrocket.

2. Not that it matters much, but why PPP adjusted GDP? If we're talking speculation, certainly exchange rates would be the better measure.

Posted by RG | April 1, 2008 12:48 AM

So basically, Iceland is the Colorado of Europe?

Posted by Joe | April 1, 2008 12:56 AM

Afraid I have to correct you there Matthew.
Its much like saying that all palestinians are terrorists. to "go viking" was an action,neither a profession nor an ethnic entity. At the time it was either "landnaam" (landgrabbing) or pillaging-depending on the strenght and size of the party.
Iceland was settled by people from the West coast of Norway,opposing our first king's unification og the country.Normandy was settled for much the same reason--this time by "viking" -i.e. by force.

Posted by Daga | April 1, 2008 5:13 AM

The Icelandic economy is extremely concentrated in a handful of interconnected sectors, namely shipping, fishing, banking (which services those industries), plus tourism. This makes it even more susceptible to speculation.

Posted by Ginger Yellow | April 1, 2008 6:09 AM

Sure, harder than Swedish or Norwegian. Does that make it particularly difficult for English speakers compared to, say, Finnish or Mandarin?

Icelandic is, essentially, Old Norse. I can sort-of read it because I sort-of taught myself, decades back, to read Old Norse. Sort-of learning ON was a piece of cake, because I had sort-of taught myself Old English first. The grammar of both languages is the same.

I would think it would be pretty easy for a German-speaker to learn Icelandic, because German has also retained the dative case and the three different grammatical genders and all that good stuff.

Posted by roac | April 1, 2008 9:39 AM

I find the idea that "viking" is a slur to be a god-damn slur itself.

Its much like saying that all palestinians are terrorists. to "go viking" was an action,neither a profession nor an ethnic entity. At the time it was either "landnaam" (landgrabbing) or pillaging-depending on the strenght and size of the party.

Thats absolutely true, but why not "reclaim" the word in the same way that Af.Ams. do with N****r?

Posted by libarbarian | April 1, 2008 11:24 AM

And always remember to pillage BEFORE you burn.

Posted by libarbarian | April 1, 2008 11:32 AM