Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

07 March 2009

Sugar, Spice and Everything Ice


Iceland lays low for the most part. Living in a small community on an island in the frigid North Atlantic, Icelanders quietly enjoy one of the highest standards of living in the world. So why would they make waves on the worldwide scene?
However, the normally unassuming country has made headlines twice in recent months. It became the first nation to elect an openly gay head of state, which was certainly a great step forward for worldwide civil rights. The entire country also went bankrupt.
Those in large countries might find that second tidbit to be a little much to take. The entire country? But let us not forget that the whole population of Iceland is just over 300,000. That's slightly less than the number of residents of Omaha, Nebraska. Considering that 112,000 Americans declared bankruptcy in February alone, the Iceland statistic becomes more believable.
But let's set the economy doom and gloom aside and look at the country itself. What must it be like to live in such a small sovereign nation?
Well for a start, everyone knows everyone else, or is at least a degree of separation away. This does not bode well for those in the service industry. One of the airlines I worked with closely was Icelandair, and almost everybody wanted 'special favors' simply because of some so-called mutual friend. ("Do you know Johanna? I know Johanna. Got any free upgrades?") The aircraft also reeked of fish. Fish is daily bread for Iceland, and accounts for the majority of its export. They have fish for lunch, fish for dinner; they send fish to their relatives in other countries as gifts. One of the main reasons they have yet to join the European Union is because of loss of control over fishing limits. This is a country serious about its fish.
When they're not enjoying fish, they're partying. Reykjavik, the capital city and home to about two-thirds of the country's inhabitants, has a reputation for being a major nightlife center. We're talking about everybody--all 200,000--getting out of work on Friday, going home to start drinking (any money saved by pre-partying will be significant, because food and drink are obscenely expensive in Iceland. As is, for that matter, everything else), then hitting the town. And not finishing until it's time to go back to the office on Monday. It's a nightlife scene to rival any in the world. This is no doubt aided by the northerly latitude: in the summer months, the sun never sets. It merely approaches the horizon and then begins to rise again. In the winter, of course, just the opposite is true: there is very little daylight for six months. Either way, it's a condition condusive to a vibrant party atmosphere.

But that's just the tip of the cultural iceberg. Iceland has a rich history and an active artistic and literary scene. The writing is, of course, in Icelandic. The Icelandic language is a fascinating study in the retention of linguistic purity across generations. It has changed so little that most Icelanders are able to read the country's medieval epics--written a millennium ago--almost as if reading a modern book. (By contrast, most English speakers have some difficulty with Shakespeare, written 400 years ago, and consider Chaucer's Middle English--650 years past--a different language entirely).
There are no family names in Iceland. Instead, your surname is your father's first name, along with whether you are his son or daughter. So Britain's Prince Harry would be called Harry Charlesson and Bob Geldof's first child would be Fifi Trixibelle Bobdottir. Except they wouldn't, because all first names must come from an approved list.
It's interesting to think about living in a land with no history of indigenous predecessors. Iceland, isolated from both Europe and North America for eons, and with few trees and relatively infertile soil, appears to have been completely untouched by humanity until its settlement by Scandinavian colonists in the 8th century AD.
The land itself is a living example of nature's power. It is relatively young by geological standards, and lies on a huge tectonic fault, which means the landmass is a breathtaking melee of tundra, glaciers, active geysers (the English word 'geyser' is actually borrowed from Icelandic), volcanoes, mountain ranges, hot springs, and violent waterways. This explains why most of the vast interior is uninhabited and why the population centers lie mostly along the southwestern coastal fjords.
This geothermal activity, however, makes Iceland one of the most environmentally friendly places on the planet. Most of their electricity and energy is generated by directly harnessing the heat below the surface. The remaining percentage comes hydrologically from waterfalls, rapids and reservoirs. Iceland is truly at the vanguard of successful reliance on renewable resources, and makes active policy of working towards carbon-neutrality. The one drawback: many places smell pungently sulfurous, sulfur being one of the main elements underground that makes it all possible.

The thought of Iceland draws slightly unfair assumptions about its climate from most Westerners, probably because the name translates as...well, "Iceland." Make no mistake, this is certainly not Antigua. But it lies at the end of the North Atlantic Drift, a fast and powerful ocean current which constantly feeds it with moderating, temperate conditions. A gift-wrapped present from neighbors to the south, perhaps. So granted, Iceland is chilly, but it is more of a never-warm place than a too-cold place. And compared to other lands straddling the Arctic Circle, its consistently 30-degree weather makes it seem like an oasis of warmth.

All in all, Iceland figures to be one of the best places on earth. It has among the highest standards in the world for literacy and education. It enjoys first class health care, and its people have the second-highest life expectancy on the planet. Crime is virtually non-existent. It is a liberal, egalitarian community governed by a progressive parliament. It boasts culture, nightlife, and stunning natural beauty. Its overall standard of living rivals any nation in the world.

And yes, Iceland's banks are in trouble. But it's a virtual certainty that the Icelandic people will persevere, recover from the crisis, and have a damn good time while doing it.

23 February 2009

How To Bankrupt Your Country And Influence People - A Beginner's Guide


I am a registered Layperson. I am not an economist. And I was, for a long time, shamefully ignorant of the complex workings of Modern Money. I still have a lot to learn, but I've been doing a little bit of research into the mess we're collectively in, and I've been trying to frame it in a way that my fellow Laypeople and I can understand. And so, I give you:

How To Bankrupt Your Country And Influence People - A Beginner's Guide

You too can use housing as a convenient means to send rich and poor alike scrambling to George Bailey's Building & Loan! Just follow these 25 easy steps!

1) Remember that investors are always looking for The Perfect Investment.
2) Remember that sex sells.
3) Have your Federal Reserve lower interest rates on safe government bonds and whatnot, effectively discouraging people from putting their money there. It's just not sexy enough.
4) Combine steps 1 - 3. Investors will stumble upon the city upon a hill, the whited sepulchre: housing. Housing is wonderful because everyone wants a house, and no one has the money to just BUY one, so they have to get loans. Furthermore, these banking types won't be able to remember a time when housing prices weren't going up. Right? Well, can YOU? I'm pretty sure it's always been increasing. Ask the secretary.
5) Refer to step 2. Chunks of mortgage interest are much sexier than Boring Old Bonds.
6) Banks will issue mortgages to people. Investment firms will buy lots of them from said banks. Presto! Safe and long term streams of income from people paying for their lovely homes every month. Chop this nice bundle up and sell it as shares to investors.
7) Even better, if people CAN'T pay their bills, the banks will have beautiful homes on their hands which will be worth more than gold, because the housing market never falters. We agreed on that, right?
8) It's a miracle drug! Demand will be insatiable! And a fun bit of serendipity: lawnmower sales will go through the roof!
9) Investors will want to buy more, and firms will need to come up with the goods, which means more mortgages will need to be given out. Hmmm. Bit of a puzzler this one.

. . . Ahh yes! I have it!

10) Give more people more loans. Begin to slowly lower your standards. It doesn't matter if people have fewer and fewer qualifications for them because . . .
a) This won't be like the old days. You won't really be dealing with this guy's mortgage for 25 years, because mortgages are being bought and sold like common stock. Transience = less responsibility. Loan away.
b) Other companies are going to approve that guy you just laughed out of the building. Are you really going to give up a sale to them? Where did you go to business school? The Carrboro Co-op? This is the real world! MAKE THAT SALE!
c) The mortgage brokers will get their money based on the loans they give, not on the payments the homeowners make, so their incentive will not hinge on being realistic. Don't even ask that client how much he makes . . . you'll only be disappointed. Ahh yes, much better. $500,000 sounds about right to me, too.
11) Standby for the teachers' pets to come out of the woodwork and question all of this. Have your rebuttals ready:
a) "The credit raters are saying these piles of mortgages are AS SAFE as that lame-o bond you bought from the Feds! Credit doesn't lie!"
b) "Damn the torpedoes! Everyone's doing it, so there must be something to it!"
12) Meanwhile, in another part of town, the actual people in the houses will be ancillary to all this trading and fun. No one will pay attention to them. Anyway, owning your very own home is the American Dream, when last I checked. They won't make a peep.
13) A catch, however: these people were never going to be able to pay up. So they won't.
14) People will start to get kicked out of the lovely houses. There will be a slight problem with this, as having all these gorgeous pieces of The Dream on the market sure do drive prices down. But wait . . . prices going down? Something doesn't add up. Did the secretary lie to us?
15) People facing foreclosure will start to take out loans they can't pay back, from companies with fun names like WaMu, to pay for the mortgages they can't pay.
16) Reality will start to set in. Now you're cooking with Crisco!
17) Somebody in a very tall building on Wall Street will decide the best plan is to stop giving loans to the unworthy.
18) The smaller banks, (in smaller buildings, not on Wall Street. More likely on Your Street), will have lots of mortgages from people that didn't deserve them and ain't payin'. Oh dear! They were going to sell them to the big credit and investment fellows on Wall Street who, as we learned in step 17, suddenly ain't buyin'.
19) The brokers and small banks will fall on their own swords and go under.
20) The large firms with the fun names will also be stuck. Not the least because they've been loaning people money to pay off loans they couldn't pay on houses they won't be able to keep. Soon, it will seem as though the money everyone had been having a grand ol' time with just does not exist.
21) The downtrodden masses will seek to renegotiate their loans. Unfortunately their leases are diluted by having too many proverbial cooks in the kitchen, and lots of cooks = too many to get any flexibility.
22) In an interesting twist of fate, the remaining companies will be 'once bitten twice shy' and now won't lend to anybody, under any circumstances, ever. Bad news for those who would have qualified in the old days. And for businesses who depend on loans to run. And for car manufacturers, who can't get people to buy anymore because they don't have the money. And for the service industry, which has fewer people to serve. And for all of the infrastructure and labor that makes all of the above possible, which suddenly has fewer people to supply. And for purveyors of
pretty much any 'luxury' item that isn't food. It's a chain reaction, you see.
23) Remember the good old days?
24) Those low-interest bonds are looking mighty good right now, eh?
25) And . . . you're destitute! National crisis seems imminent. Enter the federal government, hopefully to save the day. They can fix this, right? Ask the secretary.

Congratulations! If you've followed this 25-step guide very closely, then you've successfully driven your economy into the ground. Try it at home and impress your friends!