I know the Michael Lewis piece on Iceland is long so here are a few bits to whet your appetite:
Fishermen in Iceland discovered the carry trade! –“The fishing guys pretty much discovered the trade and made it huge,” says Magnus
“I think it is easier to take someone in the fishing industry and teach him about currency trading,” he says, “than to take someone from the banking industry and teach them how to fish.”
We’ve heard this before- quote from a drunk staffer at the Central Bank: “Vee try to tell them dat our problem was not a solfency problem but a likvitity problem“
Almost certainly Iceland will adopt the euro as its currency, and the krona will cease to exist.
I spoke to another hedge fund in London so perplexed by the many bad LBOs Icelandic banks were financing that it hired private investigators to figure out what was going on in the Icelandic financial system
Lots of examples of how investors did not know what they were doing, including buying a huge chunk of AA when they didn’t know airlines, or buying shares in an almost defunct Scandinavian bank
You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks
When most banks buy another bank, they do due diligence. Kaupthing had no interest, so the acquiree flew to Iceland to see who the acquirers were. “They were very different,” he told the House of Commons committee. “They ran their business in a very strange way. Everyone there was incredibly young. They were all from the same community in Reykjavík. And they had no idea what they were doing.”
The acquiree examined the acquirer’s book and “Virtually the entire bank’s stated profits were caused by its marking up assets it had bought at inflated prices.”
“Like any new kid on the block,” says Theo Phanos of Trafalgar Funds in London, “they were picked off by various people who sold them the lowest-quality assets—second-tier airlines, sub-scale retailers. They were in all the worst LBOs.”
One of the hidden causes of the current global financial crisis is that the people who saw it coming had more to gain from it by taking short positions than they did by trying to publicize the problem
There’s a charming lack of financial experience in Icelandic financial-policymaking circles. The minister for business affairs is a philosopher. The finance minister is a veterinarian. The Central Bank governor is a poet.
This is universal: “We could not say publicly our fears about the banks, because you create the very thing you are seeking to avoid: a panic.”
Iceland introduced a quota system for fishing in the 70s and these quotas were borrowed against and securitized.
Before Alcoa could build a plant, it had to commission a study to make sure no elves were living in the area. Enough Icelanders believe in the existence of elves to justify this.