Economic meltdown. The dominos show signs of toppling over ....first Iceland then Ireland ......

You may be right Sig but it's certainly being interpreted as a crisis in the financial pages over here.

Another day, another obituary for the Icelandic economy. This one's from today's Guardian and the author even takes my analogy of 'dominos toppling over' ...........

"Hot money leaving a cold climate could signal the big freeze Ashley Seager Monday April 3, 2006 The Guardian

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It may just be a chilly island close to the Arctic Circle with a population barely above 300,000 and fish its main export - but it could end up cutting the value of your home and your share portfolio. Events in and around the Icelandic economy, culminating last Thursday in a further interest rate rise from its central bank, may be the first sign of problems in global financial markets with unpleasant consequences for all of us................continued ...." The article even ends with a comment on the possible effects of all this on the UK housing market ......... "The strange thing is that Iceland could eventually trigger a sharp slowdown in Britain's housing market," says Mr Jessop.

Cue Tumbleweed aka pollyanna to tell us it's all nonsense and everything's just fine and dandy really :-)

Reply to
Crowley
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I wouldn't disagree with you there at all. Bush is indeed simply a puppet of the US military machine, oil barons, unscrupulous companies like Haliburton, and a Likudnik clique who wormed their way into the higher echelons of the US administration and have been unduly influencing it's foreign policy.

The huge global imbalances created by US profligate "borrowing to spend" particularly on their imperialist wars and their consumer spending boom dwarfs the problems of Icelandic banks into relative insignificance. The Icelandic situation though is like the canary in the mine, a foretaste of much worse to come globally.

BTW perhaps you can try discussing this without throwing in playground insults and changing headers or is that asking too much of you ?

Reply to
Crowley

If nothing is done about it then it is not okay but Iceland has in fact a very robust economy and these things are being watched carefully. Great investments in hydro and geo-thermal power stations and other building projects have both caused an increase in trade deficit and caused one of the worlds lowest rates of unemployment (1.5%) The Krna had been rising steadily for the last couple of years and was considerably over-valued. This caused hardship for the export industries and tourism and the fall of the Krna is much better for the economy than the artificially high rate that we had around the end of last year. So the end result? Yes, it is quite OK.

**************************** interest rates of 11.5% are never OK. a current a/c deficit of 15.5% of GDP cannot be OK.

is a weak currency good for a country which imports more than it exports?

why did the treasury in iceland have to suspend a bond auction?

why will US investors not roll over ISK116bn of debt owed by icelandic private banks?

it would be nice to think that such poor fundamentals would go away.

but, i think we will be talking about iceland again soon.......

Reply to
Scott2k5

The Icelandic króna has been overvalued until now, it is not weak.

Because it did not like the result, they were just doing a check on the market and considered it best to wait until the furore dies down. They certainly did not need the money, the state has been paying up their loans in the last few years and they have a very high credit rating.

They don´t? I think they did. But the competitors to the Icelandic banks will try and convince you otherwise. They are wrong, however.

Reply to
sigvald

I'll take his playground behaviour over your silly Bush rants any day :-)

The truth is that the US is not creating any kind of huge global imbalance and if the US people did not spend as they do, then it would hurt small economies far far more. The fact is that the US can cope with these kinds of imbalances because of the sheer size and dynamism of their economy which can grow out of these imbalances in a few years, as they did during the Clinton era. The US economy is the engine that drives the whole world economy because the EU, though equally huge, is no where near as flexible or powerful.

The only serious danger to the economies around the world is the price of oil and the consequences of not winning the war on global Islamic terrorism. Otherwise the outlook is excellent, especially for Ireland.

Reply to
Howard9

Howard9 wrote: .

Excellent. Another Pollyanna. Tumbleweed you are not alone ;-)

Reply to
Crowley

This is a link to the last Moody´s report:

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Reply to
sigvald

you cannot be serious!!!!!!!!!!!!! investors were demanding a risk premium on the debt! that is the market's way of saying they are concerned about not getting paid back on time

there is a current account deficit of 15.5% of GDP and they don't need the money?

come on!!!!!! why do you think they were planning a bond auction? the ONLY reason is because they need the money!

you should read the papers in the UK. Full of adverts for UK government debt. our economy is being kept afloat with borrowed money.

spending borrowed money is great fun. excellent fun. it is a real pain in the a** paying it back though. few governments think about that part of it.

Reply to
Scott2k5

I think you'll find I have posted very little that is bullish. I simply choose to take issue with people who pretend to know (esp with great conviction) what is going to happen in the next year or two, especially when they cant even predict what will happen in the next week with a single pair of currencies, let alone the full panoply of the world economy ..but you are in good company, seems The Times financial editor cant get it right either :-) and I see that the dollar is now weaker against the pound compared to last week..where is that collapse for the pound you were both forecasting?

In summary, my main prediction is that people who predict things tend to be wrong, except when they predict that people who predict things tend to be wrong.

Perhaps you'll come back in a few months and tell us how Iceland is doing? As you have predicted a collapse, my prediction is, that it wont happen. And as you have used economic statistics and theory to predict this, the same sort of theory that predicted a sterling sell off last week, I am very confident you'll be wrong :-)

Reply to
Tumbleweed

No offence intended TW. The pollyanna reference was just my little joke. A repost to your 'chicken little' one from a while back :-)

Now, now. I never predicted a collapse in sterling did I ? The Times scribbler's warning was pure drama queen stuff as a meltdown of the pound last week was never going to happen when the rise in dollar rates above sterling rates had been signalled, and priced into the markets long ago. It's *unexpected* raising or lowering of rates that will alter curency values. As for "my predictions" I expect both the pound and the dollar to be revalued down in the medium to long term against several currencies inc. the euro, yuan, and yen.

Mystic Meg maybe but have you read Jonathan Cainer ? ;-)

Oh dear. Again where have I predicted a collapse for Iceland ? Look at my title: "the dominos *show signs* of toppling over...."

I posted a report by Fitch Ratings expressing grave concerns about the state of Icelands economy particularly with regard to debt in the banking sector and asked whether this was the 'first domino'. This provoked a lively discussion in which Sig posted a report from Moody's appearing to give Iceland a clean bill of health while other posters and several news articles this week suggested big problems to come.

After all this cut and thrust I can only say "I don't know" whether or not Iceland's economy faces meltdown but the omens do not look too healthy from where I'm sitting.

Reply to
Crowley

No offence taken :-)

.

Oh dear, do you want a cushion for that fence you are sitting on :-)

Reply to
Tumbleweed

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