Friday, May 23, 2008
The solution - join the EU and the euro - NOT
Market Oracle: Iceland Facing Meltdown as the Credit Crunch Sinks its Currency
This tiny country - home to a mere 300,000 people - has somehow created a financial system nine times the size of its gross domestic product (GDP).
The Icelandic krona has fallen 26% against the euro this year. Over the past three months, consumer prices are up 6.4%. That's equivalent to an annual inflation rate of 28%. The economy will contract by 2.5% next year and 1.5% in 2010.
Posted by sold 2 rent 1 @ 09:12 AM (728 views) Add Comment
10 Comments
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1. sold 2 rent 1 said...
The "fifth night" destruction is set to worsen in Europe in June.
Watch the long awaitied currency crises of Iceland, Eastern Europe, Turkey etc hit next month
28pc inflation - WOW
2. japanese uncle said...
Don't forget GBP.
3. Rental John said...
In the UK we have seen a 15% annual fall against the Euro, so not so good for us either...still we are stronger against the Krona! Think I'll buy some Cod futures.
£ - Euro http://finance.yahoo.com/currency/convert?amt=1&from=GBP&to=EUR&submit=Convert
£ - US$ http://finance.yahoo.com/currency/convert?amt=1&from=GBP&to=USD&submit=Convert
US$ - Euro http://finance.yahoo.com/currency/convert?amt=1&from=USD&to=EUR&submit=Convert
4. Rental John said...
Zimbabwe anyone?
http://finance.yahoo.com/currency/convert?amt=1&from=GBP&to=ZWD&submit=Convert
5. uncle tom said...
The Icelanders would be crazy to join, the rest of the EU would be crazy to let them in.
But as the EU would give the Icelandic politicians a gold-plated future, you can be sure they'll talk up the idea..
6. paul said...
GBP has lost at least 20% of its value this year.
That's a fast inflation rate in Iceland, however I'll bet they are calculating inflation more truthfully than we do.
The UK's GDP will contract too, we'll simply revise the forceast downwards, to be announced when it is next convenient to bury bad news.
Still the Nordic banks seem happy to bail them, much as the BoE does here, so I'll keep my money with them for the time being.
7. housebear said...
The word "credit crunch" should be replaced by reporters for something a lot harder hitting.
e.g. debt crunch, massive dept crash, dept crisis. etc.
"credit crunch" is such a soft term for a huge problem.
8. Sneaker said...
Credit crunch? More like, return to something more normal than the period since 2002. It's been a very strange decade, and Iceland is just one of its products.
As for Iceland, this idea of their huge financial system is just nonsense. Is anyone seriously worried that so many hedge funds are domiciled in Grand Cayman or Jersey? And what about Luxembourg, Liechtenstein, Gibraltar or Andorra?
It's just a domicile issue and it wouldn't matter even if there was a population of just one person.
9. paul said...
housebear, you are right. "credit crunch" almost sounds like a soft landing.
I see that inflation in Japan has jumped because of Chinese import prices. now if the BoJ raises rates, the crunch will be the sound of US banks buckling when when their liquidity valve is closed.
10. str 2007 said...
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