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Posts Tagged ‘financial collapse’

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Iceland, “the little Cuba of the north”, grateful for Russian support

Posted by seumasach on October 8, 2008

`Iceland is turning into the little Cuba of the north, said Ragnar Hannes Gudmundsson, 38, who has worked at Kaupthing Bank hf, Iceland’s largest lender. “The Soviet Union supported Cuba decades ago and now they are saving us.

Oct. 8 (Bloomberg) — For Russian Prime Minister Vladimir Putin, the financial crisis that is costing his government $200 billion may also provide an unexpected opportunity to expand his country’s influence.

Rejected by its Western allies, Iceland yesterday said it was in talks to borrow 4 billion euros ($5.4 billion) from Russia to shore up its financial system. It would be the first time Russia has extended financial assistance to a NATO country.
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Financial crisis: UK bank bail-out: The key points

Posted by seumasach on October 8, 2008

Here is a nice little summary of the government’s bailout. I have made a small correction. Does anyone think that this looks like a partial nationalisation of the banks? Let us know your views!

Telegraph

6th October, 2008

The Treasury has today unveiled a multi-billion pound package in an effort to restore confidence in the banking system. Here are the key points.

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Treacherous left joins chorus of approval

Posted by seumasach on October 8, 2008

One has to admire the control systems of  the British elite.  In the USA last week it appears that the threat of martial law was necessary to bring Congress into line. Nothing so crude over here: they already have their spokesman strategically placed right across the political spectrum ready to chime in with their support or to provide “verification” to the key lies such as that this is a partial nationalisation. The left and far-left have done more than their share in their usual treacherous fashion. Here, leftist icon, George Galloway, does his bit. In amongst all the vacuous leftist verbiage, the essential message for the government is positive though perhaps, “too little, too late”. The left continue to make great play of the sophistic notion that government hand-outs to bankers constitute a break from neo-liberalism.

A statement by George Galloway

socialist unity

“In the midst of this financial crisis which threatens us all, at last the government is taking action which may begin to shore up the banking system. I hope that it is not, as many in the City are saying, “too little, too late”. At almost every step the government has delayed: it’s taken some time to for the Prime minister and Chancellor to detach themselves from the outdated dogmas of free market economics. The Tories managed the appearance of doing so quicker, testimony to their cynicism and opportunism. If anyone suspects sincerity in the Tories mock outrage at the City spivs, then look at the party’s hedge-fund backers and its MPs’ directorships.

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Iceland crown falls vs euro after PM fails to reassure

Posted by seumasach on October 8, 2008

Reporting by Carolyn Cohn and Natsuko Waki

Forbes

LONDON, Oct 7 (Reuters) – The Icelandic crown fell against the euro on Tuesday after comments from Icelandic Prime Minister Geir Haarde failed to reassure investors.

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Iceland unions push government to join EU

Posted by seumasach on October 7, 2008

Can anyone think of another offshore financial speculator economy whose currency has become very vulnerable against the Euro?

Leigh Philips

EU Observer

6th October, 2008

Iceland’s trade unions want the country to join the European Union in return for help in an economic rescue plan, as the island state’s government holds emergency talks to shore up its teetering economy.

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The Wall Street bust

Posted by seumasach on October 7, 2008

Doug Noland

Asia Times

7h October

Click on link above for full article

I still owe readers a thorough analysis of the Q2 2008 flow of funds. For now, I’ll just point out some data relevant to the current state of acute fragility.

Looking back, Total Non-Financial Debt (NFD) expanded US$578 billion during 1994. By 1998, NFD growth for the year had surpassed $1.0 trillion. Non-Financial Credit increased $1.153 trillion in 2001, $1.415 trillion in 2002, and $1.676 trillion in 2003, before reaching the $2.0 trillion milestone in 2004. Incredible as it was, debt expansion then surged over the next fateful three years. Growth rose to $2.319 trillion in 2005, $2.428 trillion in 2006 andthen to last year’s record $2.561 trillion.

Importantly, this historic credit inflation inflated asset prices, incomes, corporate cashflows/earnings, government revenues, and various types of spending throughout the US and global economy. It was a self-sustaining bubble bolstered by ongoing credit excesses, asset inflation and resulting purchasing power gains. But NFD growth slowed sharply to an annualized $1.726 trillion during this year’s first quarter and then sank to $1.127 trillion annualized during the second quarter. Credit growth is now in the process of collapsing.
We are today witnessing the acute stage of bursting credit bubble dynamics. It’s an absolute debacle, and there’s little our well-intentioned policymakers can do about it other than try to slow the collapse. To be sure, there were momentous effects to both the economic and financial structures during the bubble period between 1994’s $578 billion non-financial debt growth and 2007’s $2.561 trillion. It is also worth noting that financial sector debt expanded $462 billion in 1994 compared with $1.753 trillion in 2007. Mortgage debt almost doubled in the six years 2002 through 2007 to $14.0 trillion, while financial sector borrowings rose 75% to $16.0 trillion.
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Iceland should turn to the IMF, not Russia

Posted by seumasach on October 7, 2008

A E4bn loan from Russia might make financial sense – although Russians might think otherwise given Moscow’s shaky finances. But it would create strategic ructions. Iceland is a NATO member, but Russia would want something in return for a loan equal to almost a third of the tiny state’s GDP. The US would fret this could eventually mean a Russian military presence in the North Atlantic.

These Telegraph fuddie-duddies, like the  ensemble of British punditry, have yet to grasp that the game is up, that support is coming from the East and that it will come with a geopolitical price. Despite British and US pressure, Iceland rejected IMF “help”.

George Hay

Telegraph

7th October, 2008

It has pegged the krona to the euro at 131 – the rate had swooned towards 200 on Monday – and is searching for foreign reserves. That’s a good idea. Less good is the idea to pass the cap to Russia.

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Terror as Iceland faces economic collapse

Posted by seumasach on October 7, 2008

Hildur Helga Sigurðardóttir in Reykjavik, Helen Power and Peter Stiff
Times
7th October, 2008

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The Icelandic Government seized control of the country’s biggest banks last night in an attempt to fend off wholesale economic collapse.

Turmoil at the banks, whose shares were suspended by the Government yesterday afternoon, had sparked panic in the tiny state, which has a population of 300,000, about the size of Coventry.

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Who will buy?

Posted by seumasach on October 7, 2008

There’ll never be a day so sunny,
It could not happen twice.
Where is the man with all the money?
It’s cheap at half the price!

From the Musical Oliver

agonist.org

Henry Paulson has turned into our very own Oliver now that he has gotten permission from the Congress to start peddling toxic mortgage securities and credit default swaps. Soon Old Hank is going to be out on the street corner with his bucket of goodies, glowing bright green with radioactivity. He’ll be looking for the man with all the money, willing to purchase something at half the price, or better.

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Yen a winner from financial woes

Posted by seumasach on October 6, 2008

Japan, with interests rates next to zero, has played the role of piggy bank to the global economy in recent years. Now this “carry trade”, one of the pillars of the global financial system is unwinding.

Kosuke Takahashi

Asia Times

3rd October, 2008

TOKYO – Faced with a gloomy outlook for the faltering United States financial system and serious worries about a global slowdown, the Japanese yen is looking to be one of the winners in the turmoil as investors increasingly seek to reduce risk.
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Iceland Going Bankrupt?

Posted by seumasach on October 6, 2008

“The usual patriotic and highly independent Icelandic politicians and union leaders are now crying out for EU membership to save them from the impeding collapse, much as Ireland was able to expand its liabilities many fold through its declaration of a 100% guarantee to all depositors, whilst comfortably sitting under the EURO umbrella and therefore avoiding a currency collapse that would have occurred if Ireland had an independent currency as does Iceland. Still Iceland will be forced to go cap in hand to the European Union to help prevent a total loss of confidence in the Krona which has crashed by 30% against the US Dollar in less than a month.”

Nadeem Walayat

Market Oracle

The focus of the financial storm now shifts to the small North Atlantic Island state of Iceland, a country with barely 330,000 inhabitants that saw its banks in recent years expand across Europe as they played and rolled the dice in the global derivatives market, financed on leverage from financial institutions across the globe that were eager to lend on the back of cheap low interest rate carry trade financing which delivered profits for nothing i.e. the difference between the rate borrowed and charged on the interbank market for a near limitless exponentially rising over the counter derivatives bubble that passed $500 trillions, that’s trillions NOT billions!

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