You are not alone

karlth

Hi,

My name is Karl and I'm an Icelander. I've been following the banking crisis in Ireland for a few months and wanted to tell you all that you are not alone when going through this crisis.

We took our hit two years ago when our banking sector crumbled. We also felt humiliated as a nation when IMF walked in and the world's press talked about our problems. We had to, and are still going through, a period of shame, anger and a rethinking of our values.

Nevertheless you'll find that not a lot will change - life goes on and as the weeks pass you'll understand that this wasn't an "Irish problem" but a problem shared by many other countries including us, the Baltics, UK, Denmark, Sweden, Portugal, etc. Some countries might hide there problems better than others but the fundamental causes and weaknesses are still there.

In so many ways our situations, politics, players and causes are similar. The difference perhaps being how we were the first in the firing line.

After two years of depression one would have thought that we'd be eating only cold vegetables. In reality little has changed. Luxury items aren't selling as well and trips abroad aren't as common, but that's really about it. One plus though is that the new super class of extremely rich bankers disappeared completely, but we really don't miss them.

I'm sure that it will be the same in your case as well. You won't notice too many changes at all. It is always painful reading about your country in a negative light but I can only say that it will pass and Ireland is not alone in the lifeboat.

If you have any questions, please be free to ask and I'll try to answer them to the best of my abilities.

Laminations

Thanks Karlth, the differences are

1. You took your medicine 2 years ago
2. You refused to pay in full for private debts
3. You have cleared out (and prosecuted) your government

Cookie_Monster

I have a question, how do you see fit to compare our situation to that of the UK, Denmark, Sweden etc? I really cannot see the parallels...

karlth

Laminations wrote: »

Thanks Karlth, the differences are

1. You took your medicine 2 years ago
2. You refused to pay in full for private debts
3. You have cleared out (and prosecuted) your government

When the banking crisis hit Iceland the government decided to let the banks fall. This was done on advice of Central Bank and JP. Morgan. The only liabilities that were in effect guaranteed were the deposits.

In regards to the government it fell after weeks of protests. The ruling party Independents are in fact very similar to Fianna Fáil in that they have effectively governed the country for more than 50 years now. The leaders almost look the same as well.

karlth

Cookie_Monster wrote: »

I have a question, how do you see fit to compare our situation to that of the UK, Denmark, Sweden etc? I really cannot see the parallels...

UK and Denmark is in a similar situation as Ireland. The difference is mostly scale and the currency. UK nationalized most of the largest banks and are shovelling cash into the black hole just as Ireland. The difference is that they can print their own money.

Sweden had its own banking crisis 20 years ago when it had to be nationalized. Today they have a huge stake in the Baltic states and if Latvia, Estonia or Lithuania defaults the domino effect would take a large portion of the Swedish banking sector with them.

In the short term UK's and Sweden's situation is better but it can change in an instant.

Bob_Latchford

http://news.bbc.co.uk/2/hi/8616113.stm


The report accuses leading Icelandic figures of negligence in failing to appreciate the systemic risk posed by Icesave to the Icelandic banking system.


Among those specifically criticised are the former Prime Minister Geir Haarde, the former finance and business ministers, as well as the head of the Icelandic central bank and the head of the financial services regulator.



Sadly I cant see this in Ireland. The cronyism is far to deep. I would be surprised if there was even a report commissioned, let alone criticism of senior players or any prosecution is brought against them

karlth

Bob_Latchford wrote: »

Sadly I cant see this in Ireland. The cronyism is far to deep. I would be surprised if there was even a report commissioned, let alone criticism of senior players or any prosecution is brought against them

What has changed in Iceland since the banking crisis started:

Government resigns after near riots.
Minister of banking affairs resigns.
Board and directors of the Financial Supervisory Authority fired or resign.
All directors of the Central Bank fired.
All CEO's of all the banks fired.
Special prosecutor appointed who is investigating most of the major financial players(tycoons). Arrests and searches ongoing.
Prime minister being prosecuted, the rest of the old government were voted by parliament to escape prosecution.
Pay cap set in the new banks at around 10-20% of previous pay. No bonuses.

--

I don't agree with some of the actions but there is no denying that they have been very drastic.

virmilitaris

Thanks karlth but there's a very large difference between Iceland and Ireland. In Iceland you prosecute financial and political criminals. In Ireland we reward them.

karlth

One thing I've noticed when following the media in Ireland is how calm everyone seems. I know it is mostly on the surface but in Iceland bloggers, for better and for worse, have huge influence.

People who have lost there job or are very radical tend to blog a lot and these blogs were very visible as they are hosted on the largest news sites and sometimes are published immediately below each news item.

I don't see this in Ireland and was wondering if it might have calming effect?

ntlbell

I think the calmness is being brought on by the fact the people feel more secure in the hands of the IMF than the current goverment.

karlth

virmilitaris wrote: »

Thanks karlth but there's a very large difference between Iceland and Ireland. In Iceland you prosecute financial and political criminals. In Ireland we reward them.

The funny thing is that is exactly what many people say here in Iceland. "Look at the United States, see how they threw the ENRON executives in jail while our criminals are still free to walk the streets."

The difference might be though that most of the bankers and tycoons cannot show really there faces in Reykjavik. They are deemed social outcasts which is why most of them live in London and Luxembourg.

Bob_Latchford

I think most in Ireland think there is very little we can do.

The die is cast and we are bent over grabbing our ankles and waiting

karlth

ntlbell wrote: »

I think the calmness is being brought on by the fact the people feel more secure in the hands of the IMF than the current goverment.

We've had the IMF for two years now and they are probably leaving in a few months. Frankly we've had no problems with them, they seem to have an understanding of local needs and problems. The horror stories from Argentina no longer apply I think.

What I'd worry more about is social unrest. I think you'll start encountering some demonstrations soon.

karlth

Bob_Latchford wrote: »

I think most in Ireland think there is very little we can do.

The die is cast and we are bent over grabbing our ankles and waiting

Well your government took the "responsible" way of guaranteeing all the banks liabilities. Anglo Irish loaned someone 1 million Euros to buy a house that is now worth only 500.000 but the German bank that loaned Anglo still want their million.

What must really stink is that some idiotic banker driving a Porsche pocketed a commission for that transaction while the tax payer bleeds.

SkepticOne

We're looking at a much bigger problem here in Ireland. Although the IMF are here, their main purpose is to enable the Irish state to get even further into debt in order to keep the failed banks going. In Iceland's case (correct me if I am wrong) it was to keep public services going.

The government here, of course, did not really do the responsible thing in saving the Irish banks. They did the politically expedient thing which was sweep the problem under the carpet and now the problem is far bigger than if they had done nothing.

It is not just the banker in his porsche that is galling. It is the fact that we're looking at a much longer period than Iceland to recover.

karlth

SkepticOne wrote: »

We're looking at a much bigger problem here in Ireland. Although the IMF are here, their main purpose is to enable the Irish state to get even further into debt in order to keep the failed banks going. In Iceland's case (correct me if I am wrong) it was to keep public services going.

Yes that is correct. National interest ahead of global interest.

Liam Byrne

karlth wrote: »

Well your government took the "responsible" way of guaranteeing all the banks liabilities. Anglo Irish loaned someone 1 million Euros to buy a house that is now worth only 500.000 but the German bank that loaned Anglo still want their million.

That is not responsible; it's a private commercial matter between Anglo and the German bank. A contract re a loan is between the two parties involved; no-one else. Let the German bank (a) take the hit for lending to a "bank" that wasn't run properly and didn't deserve it and (b) take Anglo to court if necessary.

Citizens of this country should not be made pay for this.

karlth

Liam Byrne wrote: »

That is not responsible; it's a private commercial matter between Anglo and the German bank. A contract re a loan is between the two parties involved; no-one else. Let the German bank (a) take the hit for lending to a "bank" that wasn't run properly and didn't deserve it and (b) take Anglo to court if necessary.

Citizens of this country should not be made pay for this.

Totally agree, hence the quotation marks around "responsible".

Amhran Nua

karlth wrote: »

One thing I've noticed when following the media in Ireland is how calm everyone seems.

Thanks for coming in and lending a bit of perspective Karl. My opinion on the general calmness is that to a great extent the real cuts and tax increases haven't been put into place yet. Things will probably be a bit more disrupted after the next few budgets.

Dorcha

I would just like to say thanks to Karlth for providing us with a truly neutral view and, perhaps, a bit of hope. As many people have been pointing out, though, it's seems to be just a case of pumping more money into the banks that have already swallowed billions. There's an old saying that you shouldn't throw good money after bad, but that seems to be what the ECB and IMF are doing. I suppose, though, that it's just an assurance to international lenders, who are throwing tantrums, that their money will be paid back. I'd love to bang some of their heads together!

dan_d

Also thanks to Karlth for coming into the debate.

I've a question - what's the level of personal debt like in Iceland? Credit cards and mortgages and loans etc? It's very, very high here in Ireland, which is one of the reasons they can't just hike tax rates way up.

Other than that I think you are right in what you are saying about the IMF.Unfortunately, in Ireland, we do not prosecute for this kind of behaviour. Thankfully I see today that the head of NAMA is taking a hard line attitude to developers and their tricks

http://www.irishtimes.com/newspaper/finance/2010/1119/1224283709769.html?via=rel

however I fear we will never really punish the people who drove us into this situation.

karlth

dan_d wrote: »

Also thanks to Karlth for coming into the debate.

I've a question - what's the level of personal debt like in Iceland? Credit cards and mortgages and loans etc? It's very, very high here in Ireland, which is one of the reasons they can't just hike tax rates way up.

Household debt as a percentage of disposable income in Iceland is the third highest in Europe, after the Denmark and the Netherlands. I don't think Ireland's position in that regard is too bad.

An interesting thing happened though last month. The majority of the home owners who were struggling had taken mortgages and car loans in foreign currencies from the banks. Now the Supreme Court ruled that linking mortgages to foreign currencies was in fact illegal and had to instead use a fixed interest rate. This lowered the debt level considerably.

In regards to prosecuting bankers what seems to be happening is that they are (or will be) being nailed on two counts: Firstly major owners influencing loan policy, i.e. pressuring their bank to loan to companies or individuals connected to them. Secondly market manipulation, i.e. the bank loaning a shell company money to buy shares in the bank.

We might see something similar in Ireland I think, especially if there is a change of government.

Sticky_Fingers

karlth wrote: »

Household debt as a percentage of disposable income in Iceland is the third highest in Europe, after the Denmark and the Netherlands. I don't think Ireland's position in that regard is too bad.

An interesting thing happened though last month. The majority of the home owners who were struggling had taken mortgages and car loans in foreign currencies from the banks. Now the Supreme Court ruled that linking mortgages to foreign currencies was in fact illegal and had to instead use a fixed interest rate. This lowered the debt level considerably.

In regards to prosecuting bankers what seems to be happening is that they are (or will be) being nailed on two counts: Firstly major owners influencing loan policy, i.e. pressuring their bank to loan to companies or individuals connected to them. Secondly market manipulation, i.e. the bank loaning a shell company money to buy shares in the bank.

We might see something similar in Ireland I think, especially if there is a change of government.

I also would like to thank you for contributing to the debate on the issues that are affecting us and for providing some perspective from a very similar position.

As regards the prosecution of bankers and their accomplices for shady practices I would not hold my breath that our elites will be brought to account. At the moment there are many many examples of financial irregularities (at the moment we can't call it anything else on this board because nothing is proven), some that would make you eyes water at their sheer audacity and brazenness.

I fear that we have only seen the tip of a very dirty iceberg and at present have no idea how deep the rot has truly crept into our financial system and government. I would personally suspect that the song and dance the powers that been have been carrying on for the last 6 months has been face saving exercise while all the time praying for a miracle that would allow them to conceal the true magnitude of the banks and the countries debts.

While no one wants the IMF/ECB to be administering their affairs it just shows how low we have sunk that many of us are just hoping that they are able to give us a reliable estimate of how deep we are in the hole.

Cheap Thrills!

Thanks karlth.

I remember saying a year or mor back that we'd be better to bring it to a head (like Iceland) but everyone kept suppressing any talk of dissent or bringing the Government down for fear of what.....???? For fear of exactly this -exactly what has happened now, a year later. Market jitters etc

All that's happened for all our fear and inaction is that we've lost a year and delayed the pain. I KNEW this 'keep calm in front of the neighbours' was futile but got talked around. :rolleyes: We weren't fooling anyone all along.

Fat lot of good all the prevaricating and procrastinating has done. I'll never again listen to people spouting such nonsense. We should have taken down this Government well over a year or more ago.

There's going to be fall out. You can't make omelettes without breaking eggs.